Fund for Down Payment & Towns for Investment

[Chan K.]

Hi BP and Friends,

I realized that after acquiring my first 4-Units investment, there is a big setback financially. This is because the conventional bank required that I put down 25%. It is pretty much all I’ve been saving for.

I’ve a bit extra left for emergency fund and about 5% for the next investment.

I have been doing the following steps in trying to get more down payments for the next investment

FYI: Conventional requirement is 25% down or portfolio is 20% for duplex, triplex and quad.

Proactive Approach so far:

a) I applied to local bank for unsecured line of credit. They grant me $25k. I guess one method is to continue to apply for additional unsecured line of credit to get enough money for down payment. Does anyone know other banks that are doing “unsecured line of credit” for a good rate?

b) I called around and asked for “equity line” or “second mortgage”, but I could not pull out much from my houses. Both my primary and investment property only have about 25% in equity. The equity is only doing 89% LTV for primary and 75% LTV for investment property.

c) I find my deal or property through MLS or drive by.

Not comfortable:

a) Get a partnership – not really desire

b) I know people normally use private lender or hard money lender for flipping. My interest is to buy and hold as an investor. I don’t know how people usually would set up private/HML for buy/hold. Usually, even if the private or hard money group lends me the 20%, I don’t how the conventional bank would feel about given me 80%. The bank required that the 20% is my saving money.

c) Seller finance property is hard to come by through MLS. Is there a website that lists all seller finance within MA?

Question and Finance:

1) Is there a bank or banks out there that is doing 20% (from on bank) and 80% (from another bank) or 10% (from one bank), 10% (from buyer) and 80% (from another bank)? I am trying to get in with “out of pocket – OOP” as much as possible, because I have don’t much saving at this point.

2) I guess my primary question is how I can get down payment fund for my next investment beside all the points I have made above. Assuming, I have good credit, good salary and some cash flow from my first investment. I don’t have much equity from my houses.

3) Does anyone know of a good towns/cities in MA or NH that are good for investment (buy/hold – multifamily or flipping – single family)

FYI: At this point I don't think I will qualify for any owner occupied property. I called and asked a bank that if I could rent out my single house, and move into a multi-family and trying to get a government 3.5% or 5% down loan like FHA etc.... I think they kind like laugh at me.

Sorry for the long note.

Thank you for sharing your though and discussion.

-Chan-

[Shaun Reilly]

Look at Michael's response because he makes several good points.

One thing I will say if you want to use unsecured credit to fund the downpayments it is most likely to get you denied the loan if you tap them after the offer is accepted during the loan process. If you want that money to "count" take it out now and let it sit in your back account. Once it is in there for a few statement cycles they won't ask where it came from.

Now the obvious downside is you will have to pay interest on it for indefinite amount of time. The less obvious thing is that it also might screw up your DTI ratio and still get you denied for the loan (Might not, but make sure you figure that out).

BTW if you really want to try living in a multi and rent out your current place there really should be no reason you would not be able to get an FHA loan. As long as you qualify there is no requirement that you sell your current residence. The only thing is you can't have more than one FHA loan, so if that is what you have on your current home you can't do it or you need to refinance out of it first.