topic Re: Personal loan for downpayment? in Mortgage Loans

Personal loan for downpayment?

jnc — Thu, 04 Aug 2016 15:22:00 GMT

My husband's boss made a casual offer a few years back, to help us with a downpayment on a home.

We weren't ready at the time so we didn't get any further into it but now that we're thinking more seriously about home buying, we are considering this.

I am assuming that what he is offering is an interest free loan.

So, my question is this. . . Will the mortgage companies allow this type of help with a downpayment? I realize the payments would have to be considered in our monthly debt and would effect how much we could borrow. But, is it even allowed?

If we want to go ahead with a purchase in the near future, we have to either consider this option or a down payment assistance program or a usda loan w/ no dp. I am not opposed to the assistanace, except that it increases the interest on our primary loan.

Anyone know if this ccould work?

Thanks,

-Christine-

Re: Personal loan for downpayment?

ezdriver — Thu, 04 Aug 2016 16:00:53 GMT

@jnc wrote:
My husband's boss made a casual offer a few years back, to help us with a downpayment on a home.
We weren't ready at the time so we didn't get any further into it but now that we're thinking more seriously about home buying, we are considering this.
I am assuming that what he is offering is an interest free loan.

So, my question is this. . . Will the mortgage companies allow this type of help with a downpayment? I realize the payments would have to be considered in our monthly debt and would effect how much we could borrow. But, is it even allowed?

If we want to go ahead with a purchase in the near future, we have to either consider this option or a down payment assistance program or a usda loan w/ no dp. I am not opposed to the assistanace, except that it increases the interest on our primary loan.

Anyone know if this ccould work?

Thanks,

-Christine-

Down payment money cannot be loans of any type. Down payment money may be gifted ... but must be gifted by QUALIFIED donors.

Re: Personal loan for downpayment?

jnc — Thu, 04 Aug 2016 16:51:17 GMT

Okay. That's what I feared.

Thanks!

Re: Personal loan for downpayment?

Anonymous — Thu, 04 Aug 2016 16:57:16 GMT

I've read that personal loans can be used as long as they are seasoned for a few months (3-6). So you could theoretically get the loan now, start paying it off, and let that cash just sit in your account.

Re: Personal loan for downpayment?

jnc — Thu, 04 Aug 2016 17:30:02 GMT

Thanks, I will look into that since I still have some time

Re: Personal loan for downpayment?

sports1965 — Thu, 04 Aug 2016 19:58:14 GMT

If u have to borrow money for the down payment then u not ready to buy a home.

Re: Personal loan for downpayment?

ezdriver — Thu, 04 Aug 2016 20:40:22 GMT

@Anonymous wrote:
I've read that personal loans can be used as long as they are seasoned for a few months (3-6). So you could theoretically get the loan now, start paying it off, and let that cash just sit in your account.

Please source that information because it is illegal to use borrowed funds for downpayment on home purchases....no matter how long the funds have been sitting in one's account. If I'm wrong, show me.

Re: Personal loan for downpayment?

jnc — Thu, 04 Aug 2016 20:40:29 GMT

Then why do 0 downpayment loans exist? And down payment assitance?

Serious question.

-C-

Re: Personal loan for downpayment?

ezdriver — Thu, 04 Aug 2016 20:45:22 GMT

@jnc wrote:
Then why do 0 downpayment loans exist? And down payment assitance?

Serious question.

-C-

There is no law against financing 100% of the purchase price. There is for using proceeds of a loan as downpayment. Apples and oranges.

Downpayment assistance programs offer GRANTS...not loans.

Re: Personal loan for downpayment?

jnc — Thu, 04 Aug 2016 20:49:07 GMT

Sorry, that question was in reply to the person above you. Apparently we posted at the same time.

Re: Personal loan for downpayment?

Mrsg714 — Thu, 04 Aug 2016 21:25:47 GMT

I'm not sure what type of loan you're interested in, but according to the hud.gov site under acceptable sources of borrower funds for FHA they list collateralized loans. I think this might be where the confusion is. Borrowing from your husband's boss wouldn't meet this criteria though.

Do you have a CD or 401k you could get a loan from?

Re: Personal loan for downpayment?

jnc — Thu, 04 Aug 2016 21:35:44 GMT

Nope, only an IRA.

-C-

Re: Personal loan for downpayment?

iv — Fri, 05 Aug 2016 03:58:45 GMT

@ezdriver wrote:
@Anonymous wrote:
I've read that personal loans can be used as long as they are seasoned for a few months (3-6). So you could theoretically get the loan now, start paying it off, and let that cash just sit in your account.
Please source that information because it is illegal to use borrowed funds for downpayment on home purchases....no matter how long the funds have been sitting in one's account. If I'm wrong, show me.

Is it a bad idea? Yes.

Would it count against DTI? Yes.

Would it likely trigger a flag from the UW? Yes.

Does it violate Fannie Mae B3-4.3-17 as a source of funds? Absolutely.

Is it "illegal"? ...um. Well, lying about it would be fraud.

But is merely having a 3+ month-old outstanding personal loan (reported and disclosed), and "seasoned" cash in the bank as a downpayment asset "illegal"?

I'm usually quite a stickler for the rules (and not infrequently seem to get branded as a shill for "the banks" or "the CRAs")... but I'm not quite seeing that scenario as illegal. (Unwise and not recommended, yeah. May be rejected by the lender, yeah. But actually illegal? I don't think so.)

Just to repeat for anyone considering this: This is a bad idea. Don't use a personal loan as a downpayment.

Re: Personal loan for downpayment?

Anonymous — Fri, 05 Aug 2016 04:27:00 GMT

I'm not suggesting anyone do anything illegal. Talk to your lender. See what they have to say. But at a certain point, if money has been sitting in your account long enough, it's really not the same thing as taking out a loan for the down payment. What if you took out a loan today and didn't buy for two years and it sat there the entire time? I mean, do what works for you and be upfront with your lender, but it IS true that people have successfully taken out personal loans and let the money season long enough that it didn't count as a personal loan for down payment purposes.

Re: Personal loan for downpayment?

StartingOver10 — Fri, 05 Aug 2016 10:18:40 GMT

What is the buyer/borrower going to say when the underwriter asks where the down payment funds came from?

The buyer/borrower will have to disclose that the funds are borrowed and that will be the issue.

The OP needs to find another way. Put together a budget and either save for a down payment or sell some things around the house or pick up a second job or get gift funds from a qualified source. The second job income won't be used for gross income unless it meets certain criteria, but the savings from that job can be used for down payment. There is a way to do this without committing fraud; that really is a road you don't want to travel.

Re: Personal loan for downpayment?

tacpoly — Fri, 05 Aug 2016 11:43:02 GMT

@jnc wrote:
My husband's boss made a casual offer a few years back, to help us with a downpayment on a home.
We weren't ready at the time so we didn't get any further into it but now that we're thinking more seriously about home buying, we are considering this.
I am assuming that what he is offering is an interest free loan.

So, my question is this. . . Will the mortgage companies allow this type of help with a downpayment? I realize the payments would have to be considered in our monthly debt and would effect how much we could borrow. But, is it even allowed?

If we want to go ahead with a purchase in the near future, we have to either consider this option or a down payment assistance program or a usda loan w/ no dp. I am not opposed to the assistanace, except that it increases the interest on our primary loan.

Anyone know if this ccould work?

Thanks,

-Christine-

Companies I worked for have offered home-buying benefits. They either offer preferred mortgage interest rates or pay points to lower rates. For Director level and above relocating to the area, they offered deferred or forgivable loans for downpayment assistance (the ones I've seen were for 5% of the loan, but I'm sure have gone higher depending on the employee's title). The loan is forgiven if the employee stays with the company for a specified time (terms are usually 25 or 33% every year for 4 or 3 years) so if the employee leaves the company before that, they would have to pay the remaining balance back to the company. It's a great incentive for people to stay. By the way, this is taxable, so keep that in mind (hopefully your company has a policy of tax gross-up for relo benefits).

Re: Personal loan for downpayment?

jnc — Fri, 05 Aug 2016 13:45:36 GMT

Thanks everyone for the input.

Trust me, I will not be going into this blindly. I'm doing as much research as possible.

I have come across a few sites that seem to indicate that a loan would be okay but perhaps that's under different circumstances than my own.

I may just look into a usda, no down, loan. Majority of the area I'll be home shopping in will qualify for usda.

Husband's company is a small one and I'm sure its not a normal offer for any employee. Actually, we moved across the country to get this job 6 years ago (after being unemployed for almost a year.. hence the foreclosure) and they offered no assistance at that time. I am thinking this was just a kind offer of help.

I'll keep brainstorming and figure something out

Thanks again,

Christine

Re: Personal loan for downpayment?

Anonymous — Fri, 05 Aug 2016 16:40:37 GMT

do you have any money in a retirement you could borrow? you could use that.

Re: Personal loan for downpayment?

jnc — Fri, 05 Aug 2016 16:55:16 GMT

We do not hae a 401k to borrow from, only an IRA. I am trying hard not to tap into that since it would not be a loan and I'd have to pay taxes on it (plus lose the10k investment!).

-Christine

Re: Personal loan for downpayment?

DallasLoanGuy — Fri, 05 Aug 2016 17:29:41 GMT

@Anonymous wrote:
I've read that personal loans can be used as long as they are seasoned for a few months (3-6). So you could theoretically get the loan now, start paying it off, and let that cash just sit in your account.

this is 100% false.

just because it is seasoned doesnt mean it is not a loan. and you have to answer a question on the loan ap about whether any part of the down payment is borrowed. not answering yes would be mortgage fraud.... a federal crime