Cash For Down
A friend of mine would like to take advantage of the low interest rates provided to 80% LTV buyers while financing his property 100%.
This was possible for me recently because I had the cash to put down then took out a HELOC to get my cash back thus regaining the desired liquidity.
He does not have the money down but, with his credit can easily ontain the 100% LTV second within 30 - 60 days of his original purchase.
Is it legal for me to give him the cash to put down so he can get the great rate then have him repay me with interest when he gets the HELOC? I know we can do it without question from the bank because of his credit (easy qual, stated assets, stated income), but I don't know if I'm opening myself up to liability or violations of the law.
I'd be concerned with how, exactly, are you going to be secured & protected so as to guarantee your being repaid.
Just hand him the cash and say "good luck" ? Well, maybe you would, but this is in no way good business practice & I"d say it's a recipe to get burned.
And another element: if you're conspiring with him to fraudulently complete a HUD 1 statement, to the effect that this is his cash, and he has no other debts on the property, then you could both be prosecuted for Fed fraud.
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Thank you. The fraud aspect was my main concern. It seems to me if it should be done there would be a greater number of investors out there doing it.
As long as you are prepared to disclose the loan to the mortgage company there is no need to worry about fraud; however I suspect you will not be going out of your way to let them know thedown payment money is borrowed.
Many lenders now want to see where my DP money is coming from - savings, etc.
Given your friends great credit, why not let a mortgage broker work his magic on a 100 LTV using a 80/20? Even if the initial 2nd is less than favorable rates, they are almost always no prepayment penalty - plus this way there is absolutely no concern about you loaning money and hiding the true source.
You did mention that you would be going stated........could it be possible to do a nina program (no income no asset). or whould they verify source of funds on this program?
But yes ....if he has great credit "a" borrower, then the broker should have noprob getting an 80/20.
that is a non conforming loan and usually carries a prepay on the 2nd. and i could be wrong but most "A" lenders wont allow a 100%CLTV, at least the ones ive delt with. this sounds sub-prime to me. but then again, ive only been in the business a short while. some HELOC'S have a prepay, very minimal but its there.
There are alot of directions to take this one. Good luck with it,
keep us posted.
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With stated income stated assets the lender is not interested in verifying where the down payment or any other $$$ came from.
The interest rate for the first on a 80/10 package is far better on than the first on an 80/20 and since it's a fixed rate for 5 to 7 years (depending on the loan structure) that equals a considerable amount of dough if he decides to hold the property.
I guess I should do the calcs and find out how much he will save over the hold period and decide if an amount that is reasonably less will be enough payment to me to take the risk.
Thanks.
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