Lender willing to accept gift funds for an investment property?

Question

Does anyone have a lender they recommend who is willing to work on a Short Sale deal where I would use some gift money as a portion of the down payment. The property is in KS and is less than 50 miles from my primary residence. We intend to use the acreage as a place to escape the city when we want but are finding it difficult to get lenders to accept the use of gift money.

The property has a house on it but it is unlivable in it's current state.

Any suggestions would be most appreciated!

The property has a house on it but it is unlivable in it's current state.

Any suggestions would be most appreciated!

Caroline Gerardo · Answer

Gift isn't the biggest problem. There is a house which is a standing hazard from what you describe. Can you get insurance to cover the risk of kids breaking in and nearly dying (probably not). Will the short sale servicer/lender approve you and how long will that take (months)? If you have the 20% PLUS gift letter only from family member and you can qualify full doc (with IRS returns) AND the loan is large enough not to be a High Cost (most have minimum loan amounts) there are some sources but it will be dear. This is a hard money only deal- the exit strategy is to either scrape the lot and sell in 18 months or come up with the cash to rehab the house to meet current health and safety codes in 18 and then refinance.

Matthew Crivelli · Answer

@Tyler Geisler

Buy the house with a hard money rehab loan. Open up a new LLC and have the person gifting you the money come on as a minority member of the new entity. This would allow them to bring money to the table without having to sign or have credit pulled. In this case you would be using a short term loan so once you refi or sell the subject property the person who funded the deal would be completely out of the picture. Just an idea.

Caroline Gerardo · Answer

Un-liveable house as in the roof is bad, there is no stove working? Lots of unknowns in your question.

It cannot be a rental unless you get a rehab type loan and repair it in the recent months.

Vacant land you need 20% down of your own funds and have to be able to carry the principle interest and taxes against your full documentation income.

Short sale can't get approved unless you have a firm Commitment letter. The servicer of the short sale checks everything. (you cannot be related to seller)

Chris Mason · Answer

From what you said, this is almost certainly a cash deal.

I do get emails from wholesale lenders once in a while about gift funds being useful for a rental property. But these aren't the discount wholesale lenders, these are the "we will do your crummy deal, but your client better not have any questions about the interest rate or fees" bucket of lenders. You might have some luck calling up a local mortgage broker and asking them to click through their email spam folder if it were JUST the gift fund thing... but a lender being lax there isn't also going to be lax regarding the below standards home itself.

Jonathan Taylor · Answer

I agree with @Chris Mason. Sounds rural and delapedated. Very few lenders would consider this as a viable lending project.

The lenders I work with do not allow gift funds since its more risk to the lender as the borrower has less skin in the game. All parties need to have some risk.

Grayson Spittel · Answer

@Tyler Geisler I have used gift letters twice in the past. That’s the beauty of private lending sometimes. Shop around for a broker that will let you if you’re hitting a wall with your current - brokerages have different thresholds for “risk”, different minimum loan amounts, strategies they offer/specialize in.

In regards to the down payment amount - if the house isn’t livable and you aren’t saying it’s going to be your primary, MOST lenders require at least a 25% down payment, if not more, for land deals. I’ve used a small local farm credit union, and even for them, it was tough to get 25%.

Jonathan R McLaughlin · Answer

Often they will accept a "gift letter" confirming the gift is outright and not an undisclosed loan. You may want to ask the gifter for that? Might help.

Dave Skow · Answer

@Tyler Geisler- most lenders will consider this a rental purchase and all lenders will not allow gift funds to be used and most lenders will require the house to be livable

Nick Belsky · Answer

@Tyler Geisler

Jet Mortgage will usually allow gift funds, even on an investment. I believe they are a wholesale lender though, meaning you will need a broker to do a loan with them.

https://jetmortgage.com/

Check out https://findamortgagebroker.co... to find one.

Cheers!

Erik Estrada · Answer

There are a few hard money lenders that can accept gift funds.

Lender willing to accept gift funds for an investment property?

Lender willing to accept gift funds for an investment property?

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