Sagle, ID · Member since 2015 · 20 posts · 2 votes
I am interested in a property that my real estate agent says requires 25% down, since we don't have that I wanted to get a credit union loan for the down payment (owner contract for the rest) but my agent keeps telling me they will not accept borrowed money only cash. I don't understand, wouldn't they have cash from the bank?
Durham, NC · Member since 2013 · 502 posts · 215 votes
10y
It sounds like the seller doesn't want to hold the note on a property that is 100% financed. I do understand him/her. A bank wouldn't do that either because it means you have no skin in the game.
Investor · Canton, GA · Member since 2014 · 727 posts · 500 votes
10y
It is not that the seller cares, no bank is not going to loan you the other 75% if you have to borrow the down payment. I would not either.
Why? If you don't have the DP, you are not able to show you have the financial wherewithal to save the DP. Be it bad spending habits, low income, whatever the reason. Second, you would effectively have no skin in the game. You could walk, and the only thing you would suffer is damaged credit scores. It makes you high risk.
Property Manager · Allen, TX · Member since 2015 · 190 posts · 160 votes
10y
I would be very wary of any seller that discourages financing. It could be that they know there will be lender required repairs that they are unwilling to do.
Investor · Thermopolis, WY · Member since 2012 · 4k+ posts · 4k+ votes
10y
I do not see the bank loaning you the money without a security interest being filed on the property (mortgage). If you can take a loan against unrelated property to get your down payment then it should not matter to the seller. No seller wants a bank mortgage ahead of their mortgage if they are holding 75% of the principal.
Sagle, ID · Member since 2015 · 20 posts · 2 votes
10y
Sorry Jerry, are you saying they wouldn't want to finance because if I defaulted on one of them it would likely be theirs? That is the only possibility I could think of as the bank loan would be on the land with the house and the contract with them would be for the remaining land. I really just wasn't sure if my agent was really listening to me though...
Investor · Cumming, GA · Member since 2015 · 79 posts · 72 votes
10y
The owner is willing to finance 75% of the property. All they want in return is 25% down. They do not want you to have to borrow the other 25% from elsewhere to get there. Why? Because If they were to entertain it at all they would at the very least want to put in a subordination clause into the loan. That means they have first position in a default situation should it occur. That being said, not many banks would be interested in taking second position on a loan on a property. So, you are set up for failure that way. The seller is wise and does not want the hassle. Or, perhaps they want more than banks are willing to loan? That is also possible...
If you really want the property the only way possible around it that I can think of is to get a loan on something else you own to cover the 25%. Or borrow it from family etc.. The seller is not obligated to hold it for you until you get that loan. I doubt they would offer that contingency.. But maybe, It's a shot. Is "your real estate agent" actually working for "you"? IE: A buyers agent or are you speaking the listing agent?
Durham, NC · Member since 2013 · 502 posts · 215 votes
10y
It sounds like the seller doesn't want to hold the note on a property that is 100% financed. I do understand him/her. A bank wouldn't do that either because it means you have no skin in the game.
I am interested in a property that my real estate agent says requires 25% down, since we don't have that I wanted to get a credit union loan for the down payment (owner contract for the rest) but my agent keeps telling me they will not accept borrowed money only cash. I don't understand, wouldn't they have cash from the bank?
Do you have to tell them it's borrowed money? It might be too late for this deal, but on the next deal just don't say anything about it, unless you are required to. I thought people used borrowed money all the time for down payments on investment property. Usually, its from a HELOC or they refinance one property and pull cash out to use as a down payment on another.
Sagle, ID · Member since 2015 · 20 posts · 2 votes
10y
I thought about not mentioning it was borrowed, as I said before I have had absolutely no communication with the sellers yet. The agent isn't the listing agent but it is her office that has the listing. This agent has told me before to move on from a property she felt could not be financed when in fact it could but I was hesitant to try another agent. I really want to try with this property and it has been o the market for 6 years so maybe they are open to riskier options or even a lower down. I can do 15% but not 25%.
I thought about not mentioning it was borrowed, as I said before I have had absolutely no communication with the sellers yet. The agent isn't the listing agent but it is her office that has the listing. This agent has told me before to move on from a property she felt could not be financed when in fact it could but I was hesitant to try another agent. I really want to try with this property and it has been o the market for 6 years so maybe they are open to riskier options or even a lower down. I can do 15% but not 25%.
I'm going to assume you've actually looked @ this property that has been on the market for 6 years. I'd proceed as follows:
Verify if Proof of Funds is required to submit your offer. It most likely is. If POF is required & you don't have enough of your own funds then..
Verify if the loan from your credit union will require security against the property or can you get an unsecured loan. If they will only do a secured loan against the property then you won't be able to submit an offer as the seller most likely will not accept an offer that puts him in a subordinate position to your credit union. If you can obtain an unsecured loan however then...
Get pre-approved for the loan & submit your offer
If your agent won't submit the offer ask for another agent; If no one from the office will submit the offer then contact the seller direct or go to another broker