Can I combine a conventional and private loan for mortgage?

8 Replies

What if our primary lender is only willing to loan 80% LTV for a duplex I'll be living in one side of, can I then come up with a bit more cash through a private lender such as Prosper or Lending Club or personal friend? I'm not sure if this counts as a gift, how/should I document it, will my primary lender frown upon this and throw a red flag up etc? Just trying to make sure we don't make any preventable mistakes.

The reasoning behind this is that we'd like to have some more cash on hand for repairs immediately after closing so that we could make one side of duplex rent ready in the least amount of time. 

Thanks much in advance to all the BP'ers who've taken time out to answer as we appreciate being pointed in the right direction from people who have been there and done that:-) 

Its not a gift.  Its a loan.  Many lenders will want to see the downpayment be your money.  They will have a form as part of the closing package that states "none of the down payment is borrowed" and you will have to sign.   They will see the new loan on your credit report.

In your case, where you're wanting money for fixup, buy the place using your cash, then get the rehab money.

Jon is right, and I assume you don't plan on living there.  If you were you can get a lower down.  

Thanks @Jon Holdman and @ Wayne Brooks, and yes, we would be living there and that didn't seem to matter. We hold 3 other mortgages with them and I have all my personal and business accounts with them as well. So it was a disappointment when they originally OK'd the 90% LTV and now discovered that's it's a duplex they've gone only up to 80% LTV.

Again, at this point we've just trying to be conservative with our cash reserves in order to do some immediate repairs. We did think about what you said @Jon Holdman in regards to getting the rehab money afterwards. Thanks for your insight and if you have any others! 

Best,

John

@John McCormack

 I would find a different lender. If you plan on living in one side of the duplex, you should be able to do only 10% down.  I think your bank is pulling your leg.

I dont know how it works on a duplex, but look up a 80-15-5 loan.

80% from lender 1

15% from lender 2 in a second position -usually a 7-10 year balloon slightly higher rate at say 5-6%, 30 year amortization

5% down

Lender 1 knows about lender 2 and both are institutional lenders.  A good mortgage broker should be able to set that up for you.  Some may require 10% down instead of 5%.

With FHA you could go as low as 3.5% down, and of course you could do a 203k borrowing for the purchase and renovations in one loan. One thing about the203k though, DTI max is 45% vs 55%.

Tough question to answer without knowing more about your income, however, not surprised that the LTV is lower for duplex vs. SFR. It's just generally viewed as a riskier asset.

Originally posted by @Wayne Brooks :

With FHA you could go as low as 3.5% down, and of course you could do a 203k borrowing for the purchase and renovations in one loan. One thing about the203k though, DTI max is 45% vs 55%.

The only problem with this is you can only have 1 FHA loan at a time and I don't know how they underwrite if you have multiple loans of another type.

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