Down payments

[Brady Lee]

So I am looking at getting my first vacation rental property, I have found a few great properties and started talking to a loan officer. They said I need a minimum of 15% down but I would prefer the 20% to avoid the PMI. However, it will take awhile to save up 20%. I do have access to funds from other people who would be willing to loan half of it to me. Is that legal? How would we do that to document it as part of the down payment? Or is that necessary? Is this a good idea? Or would it be better to save up the money on my own and just wait longer. I would appreciate any and all advice from more experienced people. Thanks

[Account Closed]

When my husband and I bought a property waaaay back when, his parents gave us money toward the downpayment.  What the lender required, was that they write a letter saying that the money was a gift and not a loan.  Not sure if that would work for you or if that's still done.

As far as saving the downpayment - what my daughter did, was she changed her deductions for her paycheck.  She works in payroll, so she knew how much she could change them without flagging the IRS.  I think the IRS gets flagged if you change your deductions to 9, so you could change it to 8, for instance.

What this did, was gave her an additional 20% take-home pay, roughly.  She saved that.  So, within a year, she could show regular savings.  And the money she would have to pay back to the IRS, which was basically a loan or debt - didn't show up anywhere on a credit report, etc.

Then, when tax time came around the following April, she filled out her taxes honestly.  Then, a few months later the IRS called and she worked out a repayment plan on the taxes she owed.  She said she calculated the cost to be around 4%.  So, it's basically a loan from the IRS for around 4%.

The IRS will notify your employer that you have to change the exemptions back to where it should be (she'd already done this), and also tell the employer that she's not allowed to change her deductions until the debt to the IRS is paid off.

She said the IRS was easy to work with, and she just paid their agreed-upon payments on time until it was paid off.

So, it's an option.  The trick is to be disciplined about saving the money.  She also borrowed money from her 401K.

Good luck.