Philadelphia, PA · Member since 2013 · 21 posts · 2 votes
The question is, if I take a personal loan from my credit union for $20K, 7 years at 11%, would that preclude me from using it for a downpayment, plus closing costs? I plan to season the money for several month's, while I pay off my CC's with my income.
I know this is a little expensive, but it speeds up the process by about a year for me. I've already factored it into my debt to income ratio, and it won't effect it that much, once the CC's are paid off.
My income is decent, and my credit is more than excellent. I just won't have any cash on hand after paying off the cc's. After doing this, I would just turn my credit paydown abilities towards the personal loan.
I'm planning on doing a 5% loan and buying a multi-unit owner-occupied building. If I buy cheaply enough I could hold on to some of the cash for rehab as well. I also found a non-fha loan that will do multi-units.
The question is, if I take a personal loan from my credit union for $20K, 7 years at 11%, would that preclude me from using it for a downpayment, plus closing costs..........
Cash received prior to 90 days of an application from any loan is not considered borrowing for that transaction. The debt will be disclosed and included to qualify. :)
I don't think you can use borrowed money for that a downpayment. I could be wrong. And the reason is because you can't afford it. Pay off cc's, save up money and then buy what you want. What happens if a heater goes out in 5 months? Or somebody moves out and trashes the place and it's $3000 to get back in order. You won't have the money to fix this stuff since you're so stretched out. The problem is you haven't factored in risk. Murphy will move into one of the apartments when you least need him too.
I was looking at down payment ideas to help me get into my first property, and I really like what you said "I hesitate when it means borrowing money so that you can borrow money.". I sometimes get ahead of myself so thank you for great advice!
I think to clarify this we really need to ask, do you have the cash right now for the DP and closing costs (CC)?
If the answer to that is yes, then I wouldn't look at it as borrowing the money for the DP/CC I'd look at it as "consolidating debt". A better way to do this may be to look at a few of the 0% no balance transfer fee credit cards that are out right now. This might help you be able to really pay those balances off quicker and not need to take out the personal loan, and also will enable you to keep your cash on hand for your property purchase and the inevitable expenses that will come with it.
This all also is hinged on how much debt it is that we are talking about, and how much income is it that you bring in. If you said I have 10K in credit card debt and make 100K/yr then I think this is a workable plan. If you have 50K in credit card debt and only make 40K/yr then you probably need to slow down and really just work on paying that off before jumping into acquiring more debt even if it is an investment property that could bring in some income.
The question is, if I take a personal loan from my credit union for $20K, 7 years at 11%, would that preclude me from using it for a downpayment, plus closing costs..........
Cash received prior to 90 days of an application from any loan is not considered borrowing for that transaction. The debt will be disclosed and included to qualify. :)
Minimally you should be borrowing enough from your credit union to drive the cost of your money down each month. If you replace 19% credit cards with 11% personal loan debt, you save $6/month per $1000 you owe.