Memory Jogger (coming up with the down payment for an investment)

How to come up with the down payment for your Vacation Home Rental

“Best part of owing a vacation rental: Make money while you sleep.”

• Savings Account: How much do you have in your savings account?

  • Conventional Vacation Home: you need 20% down to avoid PMI, can get away with 10% on some loans OAC.

• Income Tax Refunds: Do you have a refund coming this year, it’s a good time to get into a home.

• Sale of personal Assets: Do you have a four-wheeler, a boat, a couch, an Icemaker, ect laying around, you haven’t used in a while? Maybe even have a garage sale. Whatever you can sell can help with a down payment on your new home.

• IRA purchase:

  • The IRA must hold the asset in it.

  • You can never use it yourself, not even for one weekend, but it's a great way to make more money then the stock market if you have a sizable IRA.

• Land Equity: if you already own the land you are building on, the bank will count the value of the land as your down payment.

• Mortgage on your first home:

  • Borrow against your current home in a refinance or as a second mortgage.

• VA mortgages:

  • Borrow against your current home in a refinance or as a second mortgage. Upfront Fee: 1st time 2.2%, 2nd use: 3.3% (exception: if Vet was disabled during duty, they are exempt from these fees and they can also be except for all or part of their property taxes).

• 401 K loan:

  • Can borrow up to 50% of it.

  • Must pay it back, but doesn't require a credit check.

  • 10% tax penalty if you don't pay it back in certain amount of time.

• Whole LIfe policy: you can cash it in for value and use it for a down payment,

• Auto Loans:

  • Must reference the vehicle you took it out on

  • Remember this option can cause your credit or debt ratio to change and disqualify you for the loan you were trying for. Talk to your loan officer before you do this.

• Other secured Loans

  • Make sure they are secured by an asset

  • Can not be unsecured debt like a credit card

• Gifts from family or “family-like”

  • Must be documented to show it is not a loan

  • Gifter must sign a document that says it was a gift not to be paid back

  • If it is over a certain amount, the bank will need to see the gifter’s bank account as well to see where the money came from.

• Partner with a Co-borrower

  • Find an investor that want to split the cost of the home

  • Go in on a property with a family member or friend.

• Registries for Money

  • Wedding registries

  • Go Fund Me

  • Must be able to account who it came from and again if the gift is over a certain amount from any one person, they may have to show their bank statement to show where the money came from.

Information was given during a class taught by Nelson Barss with Utah Independent Mortgage Corp.

These ideas are just to help you come up with ideas on how to come up with your down payment. All of these ideas should be run past your loan officer before you take any action, as one or another may cause you to no longer qualify.