Down Payment Advice

2 Replies

I'm looking to purchase a multi-unit rental property in southeast Virginia. I have been pre-approved for a mortgage; however, the lender requires a 25% down payment. While I have this, it would stretch me really thin, and not leave much room for reserves and money for repairs. Plus, I'd like to bring as little of my own money to the table as possible. I also don't have a HELOC or anything else I could pull from.

I initially thought about using hard money for the down payment, or having the seller finance a portion of the down payment, but this lender will not allow a second mortgage. 

I can only think of two options at this point:

1. Use a partner to help finance the down payment; however, the lender will also require the partner to be listed on the mortgage. 

2. I could use hard money and/or seller financing to purchase the home, and then refinance the property with a mortgage. 

Do these options sound reasonable? Any other tips or advice? Thanks!

The hard money option will be very expensive considering that you will have to hold for at least six months to one year before you can refinance.  So keep that in mind.

If you can get seller financing it will be the best way to go. You can offer to refinance after one year to get them all their money. But be sure your numbers are such that you will appraise at 75% LTV which is what they will require.

Have you considered living in one of the units? In 2-4 unit buildings you might qualify for a FHA loan and only pay 3.5 percent.

If you have a willing partner that will work also as long as everything is clear between the two of you on early aspect, things like who pays the mortgage, who claims how much on taxes, who manages, etc.

Good luck

Sean Ploskina, Oceanside Properties | [email protected] | 757‑581‑1488

Thanks @Sean Ploskina ! That is great advice to keep in mind. I just purchased the house I live in less than a year ago, so unfortunately, it's too soon to be moving again. I will pursue the partner/seller financing options. Thanks again.