dealing with bank when using a partner for down payment

[Mark A Hall]

If one uses a partner for the down payment of property what do banks expect since they want to see the paper trail of money.

[Andrew Postell]

@Mark A Hall the answer here is based on the loan type that you receive.  

In the lending world there are basically 2 types of loans for these properties - "Conforming" loans or "Portfolio" Loans.

A "Conforming" loan is a loan governed by Fannie Mae and Freddie Mac (if you recognize those names). You can this same loan from any bank. The rules to Fannie/Freddie loans is that you have to loan in a person's name. 30 year fixed rates here with a lower rate than other loan types. The rates and terms are better for these loan types but there's not much flexibility for the bank to make a decision - since it's not their money. This loan type would be very specific on sourcing the down payment you have.  You would need to either have it in your personal account long enough to generate 2 months of bank statements so the bank would not see the deposit from your lender or have a business bank account.  Business bank accounts are not required to be sourced with Fannie/Freddie loans.  HOWEVER - and this is a strong however - a bank could have an "overlay" that that add ON TOP of the Fannie/Freddie guidelines.  So if you are seeking this route then please talk to your lender about their requirements.

A "Portfolio" loan is a loan that comes from the bank's own portfolio of money - thus the name. So the bank makes the call. These loans could be easier to qualify for but the terms are different than a conventional loan. Sometimes the rates are adjustable, sometimes they are higher rates, sometimes these are 15 year loans....and often they are all three of these. And since the bank makes their own decision on their own money...each and every bank will have slightly different loan rules. You would literally have to call each and every bank to find out the rules to each and every portfolio loan out there.  These loans types might not care about where your downpayment comes from, that you have silent partners, or that your credit is bad. But they could.  If you wanted to go this route you would need to speak with each bank.

In both scenarios a smaller or mid-sized lender is a better route than a larger bank.  Hope this helps!