Having seller give down payment on Commecial Loan?

[Tyler J.]

I had some bring this up recently about buying x% over listing, and having the seller pay you back the difference which you use for the down payment.
Can the seller "fund" me any amount during close?

What am I missing or can I learn here with this method?

[Doug Smith]

Institutional lenders typically don't allow this. They will want to "source" the down payment, meaning that they are going to want to know where it comes from. They might ask for two or three months of your bank statements to see if it has "seasoned" in your accounts for a while...meaning was it in the beginning balance of the oldest statement. If it was deposited, where did it come from? They'll want a paper trail such as a settlement statement from a property you just sold. Some might accept a gift from a family member, but they'll have to source that too. Usually, they will not allow borrowed funds or a seller concession to be the downstroke for your down payment. Default rates are exponentially higher for those who don't have their own cash in the deal. We will want to see some sort of skin in the game. I hope that helps. 

[Tyler J.]

Quote from @Doug Smith:

Institutional lenders typically don't allow this. They will want to "source" the down payment, meaning that they are going to want to know where it comes from. They might ask for two or three months of your bank statements to see if it has "seasoned" in your accounts for a while...meaning was it in the beginning balance of the oldest statement. If it was deposited, where did it come from? They'll want a paper trail such as a settlement statement from a property you just sold. Some might accept a gift from a family member, but they'll have to source that too. Usually, they will not allow borrowed funds or a seller concession to be the downstroke for your down payment. Default rates are exponentially higher for those who don't have their own cash in the deal. We will want to see some sort of skin in the game. I hope that helps. 

Thank you for your reply. By Institutional, do you mean FHA, Conventional, or all loans outside of private lenders?

[Doug Smith]

Quote from @Tyler J.:

Quote from @Doug Smith:

Institutional lenders typically don't allow this. They will want to "source" the down payment, meaning that they are going to want to know where it comes from. They might ask for two or three months of your bank statements to see if it has "seasoned" in your accounts for a while...meaning was it in the beginning balance of the oldest statement. If it was deposited, where did it come from? They'll want a paper trail such as a settlement statement from a property you just sold. Some might accept a gift from a family member, but they'll have to source that too. Usually, they will not allow borrowed funds or a seller concession to be the downstroke for your down payment. Default rates are exponentially higher for those who don't have their own cash in the deal. We will want to see some sort of skin in the game. I hope that helps. 

Thank you for your reply. By Institutional, do you mean FHA, Conventional, or all loans outside of private lenders?

When I say "institutional", I mean a bank, fund, or professional loan company. Non-institutional, I would consider, an individual lending out of their IRA or something similar. Technically, DSCR and Flip loans are "Commercial" as they are made to an entity (LLC, S-Corp, or the like) while Consumer Residential Mortgages include Fannie/Freddie/FHA, VA, USDA, most non-QM, etc). Are you buying this property in your personal name? as an investment? a residence for you? in the name of an entity? That would help me answer, but my above answer will likely be the same.

[Tyler J.]

Quote from @Doug Smith:

Quote from @Tyler J.:

Quote from @Doug Smith:

Institutional lenders typically don't allow this. They will want to "source" the down payment, meaning that they are going to want to know where it comes from. They might ask for two or three months of your bank statements to see if it has "seasoned" in your accounts for a while...meaning was it in the beginning balance of the oldest statement. If it was deposited, where did it come from? They'll want a paper trail such as a settlement statement from a property you just sold. Some might accept a gift from a family member, but they'll have to source that too. Usually, they will not allow borrowed funds or a seller concession to be the downstroke for your down payment. Default rates are exponentially higher for those who don't have their own cash in the deal. We will want to see some sort of skin in the game. I hope that helps. 

Thank you for your reply. By Institutional, do you mean FHA, Conventional, or all loans outside of private lenders?

When I say "institutional", I mean a bank, fund, or professional loan company. Non-institutional, I would consider, an individual lending out of their IRA or something similar. Technically, DSCR and Flip loans are "Commercial" as they are made to an entity (LLC, S-Corp, or the like) while Consumer Residential Mortgages include Fannie/Freddie/FHA, VA, USDA, most non-QM, etc). Are you buying this property in your personal name? as an investment? a residence for you? in the name of an entity? That would help me answer, but my above answer will likely be the same.

 Hey Doug!
This would be in the scenario of buying as commercial, under an entity (LLC) for investment.

Thank you!

[Tyler J.]

Just want to bump this post

Thanks all!