This question comes to us from a real estate agent in Richmond, CA.
Q: Can my buyers come in with a lower down payment if the Seller carries back a 2nd Loan?
A: The short answer is yes.
We can entertain a purchase transaction for properties where the buyer will not occupy the home as his or her primary residence.
As long as the property is being purchased for investment purposes, we will certainly consider a transaction where secondary financing is being provided directly by the Seller(s).
I realize that many people would love to buy an investment property with zero down payment, but there’s a good chance that the borrower (buyer) would need to provide ‘some’ down payment of their own. This is called ‘Skin in the game’.
In order to help you secure quicker and easier financing for the first loan (1st lien position), the proposed new loan LTV should be as low as possible to reduce the lender’s risk.
For example, there will be a larger pool of private lenders willing to finance 40% or 50% of the purchase price in front of a Seller’s 2nd loan, whereas fewer lenders would be interested in financing a 70% LTV 1st Lien with a 30% LTV 2nd loan carried by the Seller.
Every real estate deal is unique, so it’s always worth your time to run any potential scenarios with us to explore your different financing possibilities to put a deal together.
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