Have you found a great multi-unit income property. It has a wonderful cash flow after all expenses and mortgage payments. But you need the down payment. How and where do you get the down payment? Here are the Sources for Your Down Payment Loans:
1. For down payments up to $500,000, you can use a second mortgage granted by a lender different from your first mortgage lender. Or you can ask the seller to take back a mortgage (called a Purchase Money or PM Mortgage) for part or all of the down
payment. Both the second mortgage and PM mortgage are a line of credit extended to you.
2. For down payments up to $100,000, you can use a line of credit from your bank. You must establish such a line of credit by
visiting your bank and talking to a loan officer. There is a small annual charge for holding your line of credit open until you use it. Once you use your line of credit you will—of course—pay the going rate of interest on the money you borrowed.
3. For down payments up to $50,000, you can use your credit card ? lines of credit. Typically, you can get a credit line of $10,000 per credit card. Five such cards give you a $50,000 line of credit.
4. For down payments up to $25,000, you can use a personal loan line of credit from a bank, a credit union, a finance company, a relative, or a business associate.
5. For down payments up to 20 percent of the price of the property, you can work with lenders who make both the down payment loan of 20 percent at a higher interest rate (typically 4 to 5 percent higher than the first mortgage rate in your area) and the first
mortgage loan at 1.5 to 2.0 percent above the going mortgage rate in your area. Both rates might be termed "hard money rates"—but you do get the money you need! With such combined loans, the lender uses your line of credit to cover the 20 percent down payment loan. The 80 percent loan is based on the condition of the property you're buying, the appraised value of the property, your credit rating, and your intended use of the property—for income purposes, as opposed to your personal residence.
Thus, your line of credit is a "bridge" that gets you full financing for a zero-cash deal. Without your tine of credit, the best loan you could get would be the 80 percent financing.
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