Buying RE with a partner using conventional loans

[Daniel Mills]

Hi guys,

I ran out of conventional loan slots. But, I have formed a partnership with someone who still has 9 left (he owns his personal residence). How do we buy property with his loan and my money? 

I know that some people will say to make an LLC. We already have one, but the problem is purchasing the property.

From my experience with conventional loans, the money for the down payment has to come from the person taking out the loan. It cannot be a gift. Is the only way to put the money in a joint account? Can I put the money in our LLC business checking account and use that? Or, will the conventional lender not allow it.

This is one of the things you hear people do all the time, but no one shares the details. How do you do this?

Thanks,

Daniel

[Frank Chin]

Originally posted by @Daniel Mills:

Thanks for the comments. 

Maybe my first post wasn't clear, I am NOT trying to use a conventional loan with an LLC. The reason I mentioned the LLC is that I know we could do this in that structure using unconventional financing. But, we will get the best rates using a conventional loan.

My partner does have enough money in his investment accounts to cover the down payment, but what I'm worried about is when he actually wires the funds at the closing table. He doesn't want to use his 401K or IRA, he wants me to pay the downpayment. I don't think that's possible, right?

It seems like the only way to do it is for us to have a joint account or I have to give him the money and it has to season in his account for a number of months. Hopefully, when we close and he adds me to the title the money won't be considered a gift and subject to taxes.

Is this right or has somebody done it differently?

After their process the loan they don't go to the closing and check to see where the money actually came from. They told me nothing can from the HELOC for the down payment when processing the loan. So we showed them my mother in law's bank account where my wife was a joint holder. They are OK with it. I paid a $6,000 deposit already and had to bring another $14,000 to the closing by bank cashier's check. Guess what? I bought the bank cashier's check with money from the HELOC.

All they want to see at the closing is a bank cashier's check, so it doesn't matter if you covered it, if he covered it, or if your grandma covered it. Whatever you do at this point is between you and your partner. No problem on what you plan to do.