Using a Rocket Loan 🚀 to assist with Down Payment?

Question

We are currently in our first house-hack and will be eligible to purchase our 2nd HH in April (because it will have been 1 year since we purchased the first one). It looks like we will likely have around $20,000 saved, but we will need around $37,000 to close with 5% down + fees in our market. Ideally, we would purchase as soon as eligible so that the 1-year timer for our 3rd house-hack stays on track, and for the 4th, etc.

I'm considering using a personal loan (like Rocket Loans) to get a ~$17k loan to help us finish off the funds needed for purchase. They offer 5 year loans at ~10% interest, which ended up being a ~$400/month payment. We are renting by room so we have increased rental income to support this extra payment, and the numbers still pencil out.

Has anyone done this before? Would I have to let the loan funds season in my bank account for 2 months? Any other considerations?
Thanks!

Sanat Bhandari · Answer

@Miller McSwain I'd still not recommend it since underwriting can and most likely will catch on to it. This has the potential to go down a rabbit hole where they can ask for invoices for personal loan's utilization and if you alter those documents, you WOULD be committing mortgage fraud

Sanat Bhandari · Answer

@Miller McSwain Generally speaking, in the lending world, using borrowed funds (with the exception of secured debt like HELOC), is considered faux pas with most lenders not allowing the same

On paper, you could get around it by seasoning the funds for 60 days and using the same for the remainder of closing costs. However, there are a couple of issues with it:

- You will have to disclose any loans you have and the source of downpayment funds

- The loan will show up on your personal credit report which may skew your credit score

- The personal loan will count against your DTI

Some ways to get around this:

- Lowering the purchase price

- Negotiating seller concessions

- Using seasoned gift funds from your close relatives with a letter of gift funds explaining that repayment is neither expected/enforced

Miller McSwain · Answer

@Sanat Bhandari

Thanks! I see.

Ideally, we won't have to use the loan (with concessions and such).

I'll talk to my lender of course. But if we can take the loan out in time to season the funds, we consider the DTI impact, and we consider the credit score impact, then it COULD be a method to acquire sooner?

Thanks for your help!