Getting 2 Loans on a Property.

[Samyak Rai]

Hello,

I will be buying my first investment property in America in Phoenix this year. I have low capital requirements so I have looked into creative financing options like seller financing. My mortgage broker also recommended a 25-year amortized commercial loan with a balloon payment at the end. This loan will require me to put 20% down. 

My question today is how I can get another loan to cover most of my down payment as well, as it would be preferable if I only had to pay closing costs (I know, I must be dreaming right!). I know people do this, but I do not understand the mechanics behind this second loan. Since the primary commercial lender will have the first lien on the property, what assurances does the second lender covering my down payment get? Furthermore, does my primary commercial lender need to know that I am doing this, or do they not care where I get my down payment from. 

Assuming I can make a property cash flow with 2 loans at high-interest rates, I would appreciate any insights this community might have on how I should approach the second loan, everything I might need to know, and any educational resources where I can read about this in-depth. 

Thanks,

Samyak

[Luis Somoza]

The first mortgage lender (senior loan) would have be ok with this. It's called combined loan to value. This isn't as easy as you would think. They want you to have skin in the game, too, especially as a first time investor.

You're better off trying to find a loan that offers a higher LTV, but that usually comes at a cost of a higher rate with more stringent qualification standards, and potentially a shorter term.