Down payment financing

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Down payment financing

Charlie Bemis
Member since 2025 · 29 posts · 7 votes

Hello All,

Had a quick thought about down payment funding I want to ask. If i were looking to add another investment property after my first, and I wanted to use the equity in the first home to finance the second, but was not able to get a HELOC or home equity loan because i did not yet have 15-20% equity in the home yet (because I have not held it long enough), would a mortgage lender on the second home let me partner with someone to help fund that next down payment instead? What would be some other down payment funding methods (besides your own capital) that I could use if i could not yet extract cash from the equity in my first property?

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  • Devin PetersonBusiness Member
    Lender · Sarasota, FL · Member since 2022 · 2k+ posts · 683 votes
    22h

    Charlie, a partner funding the down payment can work, but most lenders care a lot about where that money comes from and how it's documented.

    If the partner is truly on title / on the loan (or structured as a clear JV with their own skin in the game), many investor lenders will treat it as borrower funds once they see the paper trail. Pure "gift" money for an investment property is much tighter than for a primary — a lot of DSCR and non-QM programs won't allow gifts the way a conventional primary does, or they'll require seasoning and a gift letter plus proof it left the donor's account.

    Other paths people use when the first property doesn't have enough equity for a HELOC or cash-out yet: seller credits where the contract and program allow them, seller financing or a seller carry on part of the stack, bringing in a money partner who closes with you, or waiting until the first deal has more equity and then using a cash-out or a second-lien / DSCR HELOC so you keep the existing first mortgage. Cross-check each option against the specific loan program's source-of-funds and occupancy rules before you count on it.

    If you share roughly what market you're buying in and whether the partner would be on the note, people can get more specific about what usually clears underwriting.

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  • Ryan BakerBusiness Member
    Lender · Strongsville / Cleveland, OH · Member since 2026 · 134 posts · 34 votes
    21h

    Happy to walk through options on using partner capital or other structures for that next down payment before a HELOC makes sense. Give me a call (my number's in my signature below) and we can map what fits your situation.

    – Ryan

    [email protected]330-548-3340
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  • Chris ColtonPro Member
    Investor · San Antonio, TX · Member since 2026 · 87 posts · 39 votes
    21h

    Ran into the same thing with my first place, not enough equity to pull anything out. What I ended up doing was looking for sellers who would let me take over their payments or carry some of it, so the cash I needed up front stayed small. Still figuring it out as I go, but that's been the route that's worked for me.

    210-756-9075
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  • Sagi Gliksman
    Lender · Indianapolis · Member since 2025 · 15 posts · 6 votes
    8h

    If you have under 15% to 20% equity in that first place, the blunt truth is you don't actually have usable equity to tap. Most lenders cap out at 80% to 85% combined loan-to-value on cash-outs or junior liens, so you are essentially locked out until the property appreciates or you pay down the principal. At that point, your only real alternatives for a down payment are bringing in a money partner, taking out an unsecured personal loan if your debt-to-income can stomach it, or just saving cash the slow way.

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  • James JonesPro Member
    Investor · Collierville, TN 38017 · Member since 2017 · 1k+ posts · 696 votes
    2h

    Charlie, I do not fund down payments out of savings for each deal. I buy a house under $100,000, rehab it, and refinance with a DSCR loan at 70 to 80% loan-to-value against an ARV of $180,000 to $265,000. The refi is what funds the next deal. That is the whole BRRRR cycle: buy, rehab, rent it Section 8 at $1,395 to $1,950 for a 3-bedroom or larger, refinance, repeat. The deal has to clear the 1% rule on the all-in, or the refi does not leave anything to work with. If you are funding every down payment from a paycheck, you will run out of cash before you run out of deals. Fix the deal, not the funding. What is the all-in and rent on the deal you are looking at?

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  • Ametria Chaney
    Realtor · Memphis, Shelby County · Member since 2026 · 317 posts · 112 votes
    59m

    Charlie, you're asking the right question at the right time — before you've committed to a second deal you can't fund yet. As Devin said, a partner can work, but the lender will want to see exactly where every dollar came from and whether your partner is on the loan or on title, so get that structure clear with your lender before you make an offer, not after. The other honest answer is that if the first property doesn't have usable equity yet, waiting and building it through paydown or appreciation is a real option — rushing into a second deal with borrowed down-payment money can leave you stretched on both properties. Talk to an investor-friendly lender about what your specific program allows, and underwrite the second deal on its own merits, not on the hope that the first one will fund it.

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