Wholesaler · Houston, TX · Member since 2013 · 57 posts · 5 votes
Hello All,
need a little help on an idea i am kicking around with little experience to fall back on so i'll jump right to it. This may or may not make any sense at all to the more experienced so bare with me. As of the beginning of this year i have finally been able to start saving money(because of a lower than desirable credit score) to put a down payment on my first rental property, a goal that has eluded me for years now due to the fact that something always pops up which stops me from saving the full amount. I am now over half way there to having the money to put down and as of this year that "something" happened to be knee surgery im paying for. My question is: Is borrowing money from your bank to cover a down payment even a real option in this case? If not, can anyone advise on some other options that may assist me the rest of the way in purchasing my first investment property? Please advise with any thoughts.
You can borrow money to fix your knee (or whatever other thing comes up), freeing up down payment funds. It's a shell game, but allowable. It wasn't a down payment loan, it was a knee fixing loan.... and I just happen to have another $20k in capital freed up, what a coincidence.
The monthly debt obligation will still be calculated into your DTI, and this is 100% a shell game, but it's one that is within guidelines.
When folks are TIGHT cash to close and PITI reserves, we often end up playing that sort of shell game. Last month, some other lender preapproved someone for about $85k more than they should have been preapproved for. I picked it up after other lender dropped the ball and closed it, but in the process we had to raid the kid's college of fund.... we didn't have to spend the money, but we had to show it as funds available in Borrower's account, not in NonBorrowerSpouse+Kids account.
My bank requires 6 months cash reserves as well as verifiable down payment of 25 - 30%. Cash reserves are 6 months of mortgage payments for me. They use my 401k as a source of this but require proof from my employer that these funds can be used for this purpose. Closing costs are 1 year of taxes up front if you escrow plus bank fees on top of that. Using your own funds can be costly. Using OPM is a technique many use. Good luck!