Seller gift down payment, any HM lenders?

Question

I am looking into a cash flowing triplex in a revitalization area of the city where the city is scraping swaths if land for more Development.

The seller will gift the down payment and I'm trying to find a lender that will loan the 80% remaining, but haven't had any luck.  It's seems that going into the deal with 20%+ equity in the deal, also knowing I'm going refinance the loan shortly after, would be appealing to a lender?  Can anyone direct me to a lender who might consider this?

Thanks!!!!

Stephanie P. · Answer

Hey Chris

The reason gifts from the seller are a problem is it artificially inflates the value of the property by 20%.  If they dropped the value by 20%, they wouldn't have to gift the down payment because it would be a deal and they would probably find a suitable purchaser.  Then lenders would be more apt to lend on the property because it's properly valued and the eventual borrower would have more skin in the game.

If a borrower is given the down payment and a lender provides the other 80%, when times get tough, the borrower can just walk away and not suffer any financial hardship.  If they put 20% down, they are less likely to walk away.  100% financing does not exist in the commercial world.

Having said all that, there are commercial lenders who do not season down payment funds, so that would be your work around.  The gift funds, in any situation, would actually have to be given and sourced.  Call the office to discuss further.

No hard money lender wants to be into a deal where the borrower has nothing in the transaction.

Stephanie

Chris H · Answer

I already knew it couldn't be used in traditional financing and that's why I'm asking about hard money

Chris H · Answer

Hard money is almost always refinanced within 6 months, that's the point of it

Wayne Brooks · Answer

No. Gifts from the seller can not be used on any traditional financing. Also, “refinancing the loan soon” means the lender will Lose money on the deal.