I am looking for a little advice/guidance. I am looking at purchasing a commercial property (multi-unit apartment building) and I believe I might be able to do it with no money down...as long as my theory holds up. Below is the break down...I am not using exact numbers here just ballparking.
Purchase Price: $600,000
Owner is willing to finance half with half down
Here is my question:
Can I get a credit back at closing with a commercial loan?
If I get a commercial loan for $600,000...(I would have to provide $120,000 for 20% down payment, leaving a total loan amount of $480,000)...The $480,000 goes to the seller (more than half of the asking price which is more than what he requires for owner financing)...The seller then credits back to me $120,000 at closing, creating an owner financed loan of $240,000 and giving me a no money down deal. Is this possible?
No. First both will want a first mtg. Second the bank lender likely will require you have some of your cash in the deal.
Both loans would need to be recorded when you purchase the property. The first mortgage commercial lender might go $480K ($450K is more likely), but they're not going to allow a second mortgage of $300K. The first lender might be willing to allow a second, if the seller is willing to do that, but they won't allow the CLTV (combined loan to value) to be 100%, let alone more than 100%. They will require you have some skin in the game.
If you're thinking, OK, me and the seller will sort it out after closing, don't do it. Any agreement between the buyer and seller must be disclosed to the first mortgage lender. Any undisclosed agreement, e.g., a "silent second", is mortgage fraud.
Thanks for the feedback it is very helpful and appreciated.
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