Hello,
Someone told me that if you are an investor and you need to show more reserves in your account for lenders- you can borrow the money from a third party at a 10% rate? Is this true? If it is true- is it legal?
:)There are downpayment assistance places that you can use. As far as the legality of it all, I think it would depend on what you are trying to do. Many types of DP assistance companies are non-profit and can be used as long as you notify the lender that they are being used. If you do not let them know and do the loan through the lender stating that the proceeds are yours, then basically you are committing loan fraud >:(
Any good loan officer will tell you the right and wrong way to utilize these programs, but remember one thing…If you don’t feel right doing something, it’s probably your gut telling you something is not quite kosher…Good Luck !! ;D
Gifted.
And a couple other things on down payment assistance:
Most of them require that the seller pay them back. It is basically a loophole in the system. So, if you get a 3% down payment assistance grant, the seller will have to pay back the DPA company the 3% plus an admin fee. So your seller will have to be open to this and willing to net 3% less than the sales price.
Also, not all loan programs will allow you to use DPA.
Don’t use any downpayment. Without leverage real estate is no better than any other investment. For example if you buy a house for $100,000 cash and it goes up 10% in value to $110,000 then you have made $10,000 which is 10% on your money. If you buy that same house and put down 10% or $10,000 on that $100,000 house and it goes up that same 10% the house is now worth that same $110,000 and you still made $10,000 but you only have $10,000 in the house so you made 100% on your money. You see the smaller your downpayment the more you make. Find a mortage broker that has a product that allows this to happen and use him. When I do my deals I have none of my money in them so my return is (divide by zero) infinate. I spend my time looking for deals not down payment money.
Down payment assistance grants (DPA grants for short) are available for investors on specific property types (1-4 units, 5+ units and mixed use properties only).
If timing is an issue (in otherwords, if you delay an offer, you lose the deal), this route is not advisable.
Regards,
Scott Miller