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My fiance and I want to buy a condo. His mother's house has been in his name for the past few years, but I've only rented. We don't have enough for a down payment since they can cost a pretty penny in the Illinois metro area and we're considering getting a personal loan to cover it. Is this a bad idea? What are the pros and cons? His credit is way above average. I make more money than him, but he will be at top pay in two years (making much more than me). Combined, our incomes are currently in the $90,000 range. Please help! I don't want to rent 'til I'm 40!!
First look into other ways of financing. 1. Ask the mortgage lender if you can apply for a second mortgage at the same time as the first. I have done this myself and had both closings the same day, so its actually just a little more paperwork, but a good interest rate. 2. Do you have a family member who would loan you the downpayment for a very short term? If so, you could take a second mortgage as soon as the 1st is closed and re-pay the family member. 3. Is the home you want to purchase priced below appraised value? If so, you can offer more than the asking price and ask that the sellers pay (the extra amount) toward your closing costs. This way the seller still gets his price and you are borrowing a greater percentage of the loan up front. Example: Joe wants 265,000 for his house and I know it will appraise for more. I offer him 300,000 for the house and ask that he pay 35,000 in closing costs for me. Joe gets 265,000 at closing and since he agreed to give me 35,000, I still owe 265,000 to the mortgage company. This is 35,000 I didn't have to bring to closing. (money that never existed) 4. Does the home need any repairs or updating? Even with a home in immaculate condition, you may not like the carpet or the kitchen, etc.. In this case, you may want to ask for an allowance to update these things. Of course that money will be applied to your closing statement and really just means less closing costs for you. Whether or not you make the changes will be up to you after you become the homeowner. If you do want to make changes, you can take a 2nd mortgage to cover these expenses after you purchase the home. I have seen many buyers purchase homes with little or no money down, and some even walked away from closing with money in hand. I would not take out a personal loan just before buying a home until I had exhausted all my other resources first. Hope some of these ideas help you.
A personal loan is not a good idea as the interest rate would be high unless it's from a friend or relative with a long term payout at a reasonable rate. You should have no trouble, especially as first time home buyers in getting 100% mortage, (for the entire amount you need). Since you expect your income to go up, you can do a couple of things... 1) get a interest only loan which converts to a regular mortgage after two years 2) buy a property which stretches your dollars right now but thta you'll easily be able to afford in a year or two... Housing costs usually stay pretty stable once you but - much more stable than rents that keep going up. good luck
Getting a personal loan for a down payment is not really a good idea. Your rate would probably be more than the home rate if you did a 0 down loan. Also, banks notice if you suddenly have $50K come from nowhere-- they ask to see bank statements to prove the money is your own and not lent from whered. He may have to get the loan himself using a stated income loan-- generally banks require the person making more money to be the primary borrower/credit score.
I dont think the personal loan is a good idea either - the rate will most likely be higher than the rate on your mortgage. I used to be in the business as a loan officer and would never recommend that. You should contact an LO and see what you can qualify for. My daughter is in the business now - applications are free. Her number is 240-843-4416, her name is Amanda, tell her Gina referred you. Good Luck!
A personal loan is debt and a lender will look to your debt ratios to determine your creditworthiness. Taking the personal loan could not only cost you a lot in interest on that loan, it could cost you much more in interest on your mortgage if it changes your debt ratios. Why can't he borrow on his mother's house then as soon as you are in your new home get a second mortgage on that to pay back the mortgage on the first property?
Try this site, there are programs out there that will GIVE you money for a down payment on a home Since you guys have good credit and this is your first home, you may qualify to put down 0% or 3% down on a home. Happy house hunting