Seller financing the down payment on my first property!

[Austin Gawthrop]

I am looking to buy my first investment property while I am still in college, and I am running into a few challenges.

Originally, my plan was to buy a property, live in it, finance the down payment with my savings, and get a 30-year FRM conventional loan. Well, after making about a dozen different offers 2 years ago, I was not having much success getting my offers accepted. Nearly every property I made an offer on had a dozen others, including some all-cash offers and some that were 20-50k over asking.

After trying that for about 6 months, I sort of took a step back to re-evaluate. Now, I’ve been presented with a unique opportunity from a family friend of mine. They have offered to sell me the investment property that they bought for their daughter to live in while she was in college, and they have agreed to finance the down payment for me. After speaking with the lender I was working with two years ago, I found out that their can’t be a second party financing the down payment on a conventional loan.

I do have a fair amount of savings but not enough to put down 20% on a $160k property plus all of the closing costs and other fees associated with getting into the property. I would just move into it and put down less, but it’s about 3 hours away from where I go to school.

I've learned about DSCR loans in one of my real estate classes, and I believe that could be an option, but I am not sure if you can have a second lien on the property when using those types of loans.

Again, If there were an option to put down 5-10%, I would not mind covering it on my own instead of financing it through the current owners, but I know most investment properties usually require 15-25% down. I would prefer to not use all of my liquid cash in case of emergencies, maintenance, etc.

What options might you recommend? Any advice would be appreciated.

Thanks,

Austin Gawthrop

[Jeff Copeland]

First of all, the market today is nothing like the market from 1-2 years ago. Financed offers are more competitive now than they were back then, so don't give up on Plan A. 

One idea on the opportunity you presented is to bring in a cosigner (such as a parent) and finance it as a second home purchase with 10% down. It's at least worth exploring the logistics of such a loan product with a mortgage broker.