Down Payment Needed For My First Good Deal

[Trevor Smith]

I realize there are laws about asking for money. So please know that I mean only full respect for the laws and I only mean well. I've never posted asking for money so I'm not sure how I should do it. 

I have a house under contract for 105k. Rehab is 15k or less. ARV is 160k. This is in Dallas, good neighborhood.

I plan to find an end buyer which cannot get a loan and seller finance to them. But I need a loan too. So I plan to do a wraparound mortgage. I have a couple bankers that have agreed to work with me if I can do 25% down. 

But I don't have 25% down. I need to borrow it. I'm willing to pay 8%. The loan will be for 2-3 years until the buyers can refi and pay me off, and then I will pay my lender off. I will write you a promissory note and I can even use my car as collateral--I'm willing to negotiate until you feel comfortable. 

Please reach out to me if you think you can help. I can provide more details and comps, etc. Please don't contact me about hard money. I would rather do no deal than pay 4 points and 14%. 

Tyvm!

Trevor

[Leland Barrow]

I hope this helps.

Banks will want to know where down payment money came from. Misleading a lender by not disclosing that you are using borrowed money when they inquire about the source of funds can be an issue. 

If you borrow a 100% to buy real estate then you are not the owner the lender(s) are. A lender can invest in real estate and buy properties if that is what they wanted. However, they do not want that, instead they want to be lenders. Hence they require you to have skin in the game so that you assume part of the risk and actually own part of the property. If you mislead lenders into believing that you have skin in the game when you really do not then that in a round about way is mortgage fraud.

When a lender says the buyer needs to have a 25% down payment then the buyer needs to have 25% of the down payment. A buyer that does not have the money could partner with someone that has that 25% and the would satisfy the requirement of the buyer having a 25% down payment.

Lenders prefer big loans because they want a return on their money. A 25K loan at 8% is not worth the time nor the effort. If a lender has 2 million to loan and wants a return of at least 8% it would take a lot of work to process 80 loans at 25K each when they could process 20 loans at 100k each, or 10 loans at 200k each. Asking for less money does not make a loan more attractive it actually makes a loan less attractive.