I have a couple questions regarding the down payment on rental property purchases. Using the plan to have the seller "loan" me the 20% for the downpayment to be paid back from the bank, does the bank care where this down payment money came from? Ex-
300k = agreed price
375k = loan from bank
75k = amount borrowed from seller
300k = final mortgage balance
Is this done alot? And are alot of sellers open to the idea?
Thanks in advance
Full Version: Rental property down payment
First a bank will never lend you more than the sales price on a straight purchase (no construction or rehab)
Banks will generally allow the seller to hold a note, provided that the buyer puts down 10% from their own funds, minimum.
The LTV will be based on the lesser of purchase price or appraised value.
No bank or lender that I have ever dealt with would allow the scenario you proposed.
best case scenario would go like this:
$300k purchase price
$30k seller held note
$30k downpayment by borrower
QUOTE(Commercial LO @ Oct 26 2005, 02:28 PM)
First a bank will never lend you more than the sales price on a straight purchase (no construction or rehab)
Banks will generally allow the seller to hold a note, provided that the buyer puts down 10% from their own funds, minimum.
The LTV will be based on the lesser of purchase price or appraised value.
No bank or lender that I have ever dealt with would allow the scenario you proposed.
best case scenario would go like this:
$300k purchase price
$30k seller held note
$30k downpayment by borrower
Banks will generally allow the seller to hold a note, provided that the buyer puts down 10% from their own funds, minimum.
The LTV will be based on the lesser of purchase price or appraised value.
No bank or lender that I have ever dealt with would allow the scenario you proposed.
best case scenario would go like this:
$300k purchase price
$30k seller held note
$30k downpayment by borrower
Yes but what if the "real" sales price is kept between the seller and buyer, and the bank thinks it is 75k more. Then the money(75k in this case) is paid back to the seller through the bank's check without them knowing. Is this illegal?
QUOTE(pozarnsk @ Oct 26 2005, 03:06 PM)
Yes but what if the "real" sales price is kept between the seller and buyer, and the bank thinks it is 75k more. Then the money(75k in this case) is paid back to the seller through the bank's check without them knowing. Is this illegal?
....and if my original scenario is impossible, then is it safe to say that there is no such thing as 100% financing on commercial property no matter what the scenario?
It's called mortgage fraud. It's a felony punishable with prison time.
Oh and they will find out. If the seller mortgage is recorded they will know. If you cannot make the payments to the seller on time, the seller will come after the property, producing the note you signed. Notification will be sent to the bank and your subterfuge will be discovered.
Chances are, you will not be able to make the payments. If the sales price is 300k, chances are the property is not worth 375k becuase it will not cash flow at the amount. If it cash flowed sufficiently at $375k the seller would sell it for that much.
QUOTE(Commercial LO @ Oct 26 2005, 03:13 PM)
It's called mortgage fraud. It's a felony punishable with prison time.
Oh and they will find out. If the seller mortgage is recorded they will know. If you cannot make the payments to the seller on time, the seller will come after the property, producing the note you signed. Notification will be sent to the bank and your subterfuge will be discovered.
Chances are, you will not be able to make the payments. If the sales price is 300k, chances are the property is not worth 375k becuase it will not cash flow at the amount. If it cash flowed sufficiently at $375k the seller would sell it for that much.
Oh and they will find out. If the seller mortgage is recorded they will know. If you cannot make the payments to the seller on time, the seller will come after the property, producing the note you signed. Notification will be sent to the bank and your subterfuge will be discovered.
Chances are, you will not be able to make the payments. If the sales price is 300k, chances are the property is not worth 375k becuase it will not cash flow at the amount. If it cash flowed sufficiently at $375k the seller would sell it for that much.
Well thanks for saving me the jail time.
So the best a guy can do is 10% down then? Credit and everything else willing.......
Depends on Fico Score. If this a rental property you can go 100% financing? 1st and 2nd.
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