Rental Property Investor · Hackensack, NJ · Member since 2019 · 23 posts · 15 votes
Peace to the forum. So my partner and I recently got pre-approved for 224k from a direct lender and he suggested that we get an FHA and put around 7k down on a property. The problem is we're short on the money. I asked if I could find another lender to cover some of the downpayment and the original lender denied this. What should I do? I could keep saving obviously but I want to see what my other options are to come up with the rest of the money. Any suggestions?
If you can't afford the down payment of an FHA loan, you shouldn't be investing in real estate. That's not meant to be an insult, but it's an unfortunate truth that everything that can go wrong, will go wrong in the first year and that's the year that you will have the least amount of cash. Keep saving and don't buy the property until you have down payment PLUS a reasonable cash reserve for emergencies
@Jelani Fearon Though it is always good to have some money reserves there are times some of investors do have to get create to find some to make deals happen. We do hear alot on the podcast from people that find a way. My firs duplex.. I had to bring $2800 to the table and I only had $3000 in my bank....it was a foreclosure so I had to do alot of sweat equity and sacrifice but I am glad I made that jump. If you work a job do you have a 401K plan? You can borrow the money from there to use as a down payment lenders will allow that since it is your money. I done that for a deal and even did a cash advanced on a credit card to get a property..though i did eventually refi the property to pay that card off. Just some ideas to toss around. If the deal is good where there is cash flow and forced appreciation there.. then that helps and if you not able to get it... the lesson you learn in finding ways to finance a property is invaluable for future deals.
Genesis Program, otherwise known as Grant America offers down payment assistance to low and middle income home buyers including those with an FHA loan or pre-approval for an FHA home loan. Grant America offers up to $34,000 in down payment assistance for new or resale homes.
My second property I bought with every penny I had. My third property I used my tax returns and spent every penny I had.
Like Les Brown says “I would rather aim high and miss than aim low and hit”.
So I’ll take a different stance than most of the people commenting. If your job is secure and can cover the mortgage, & you don’t have any debt, then you can whether the storm (if there is one). Sometimes we just aren’t in a position to save much. I know a lot of people will disagree with me, but this is what I have done. But I’ve also been willing to risk everything to get what I want in life. I have gone to yard sales and sold items on eBay to come up with the rest of A down payment. I am also working two jobs now to help save, and feed a family. If there is a will there is a way! If something breaks I look up how to fix it, and I fix it.
Just make sure one things certain living in NJ. That the furnace has some life to it.
@Jelani Fearon you can simply get a family member to “gift” you the money. They must make it in the form of a check but you must state that it’s a gift from a family member to be able to make it count.
Bank of America has a program to help with downpayment and closing cost. Its called America's Home Grant program. I think they'll also do 3 percent down. Obviously it depends on your credit history to qualify.
If you're short for FHA down payment you can check if the property qualifies for USDA Financing, it has lower DTI guidelines, but allows 100% LTV and you can also use 6% seller contribution to cover closing costs and escrows.
I would suggest chatting with a mortgage broker, we tend to be more familiar with a broader scope of loans than any 1 direct lender.
As everyone has said though.. investing is cash intensive so you may want to save a little before getting started.
@Jelani Fearon My man! I would probably find a good mortgage broker (for financing advice and they will shop your loan around, which is good for you) and save up a little more money than just the down payment at least 2x the down payment.
In investing stuff just tends to break right after you get it! Lol it’s like an unwritten rule lol best of luck to you man!
I would encourage you to be creative & jump in whenever possible. There are many very successful ppl who've spoken about taking risks when starting out. Although they won't advocate putting the DP on credit, etc, they admit it's what got them to where they are today. So I'd say jump in, but cautiously.
FHA is picky about what they accept for a DP. They do allow you to use a 401k loan. You could negotiate to have seller pay closing costs, or increase sales price by amount of closing costs to finance these.. There are multiple ways to bring $0 to closing for an FHA.
Where I am in Hennepin County there were grants last yr offering to cover the entire DP, & multiple other programs beyond FHA offering low DP options, & with very low PMI. I'd research your area. There probably are incentives, especially if the city has a revitalization plan.
This is what I’d do: I would get the money from friends or family. Then I would get a second job or find a way to make more money then save that money for whichever property issues might arise later on.
Why do this now?
Property values are increasing very rapidly right now. If you take action right now you might have good equity in 5 years or less (obviously it depends where the property is located)
What happens if you do this later?
If you decide to wait and not get a second job it might take a while to save up money and the property will be more expensive therefore the downpayment will be higher.