3 Sources for Down Payment Funds

3 Sources for Down Payment Funds

If you’re buying investment property and intend to hold onto it for the long haul, unless you’re paying cash, you’ll need financing. And even if you had the cash with plenty to spare, with today’s interest rates, it makes sense to leverage your purchase and keep your cash for other things. Conventional loans for rental properties require at least 20 percent down, that’s in addition to closing costs associated with the transaction, which can amount to $3,000 to $4,000 or more. So where can you find the funds to close on your next deal?

Your Bank Account: This may seem a bit too obvious but your bank and investment statements will go through a level of scrutiny that you may not have expected. Your lender will ask for the most recent two months bank statements, all pages. Even if a page or two is blank or says, “This Page Intentionally Left Blank” the lender wants to see it. At the same time, the lender will match your stated income with your paycheck stubs and look for similar deposits on the days you get paid. If you bring home $3,500 on the 1^st and 15^th, the bank wants to see those amounts on the statement.

HELOC: A home equity line of credit, or HELOC, is also an acceptable source for cash. A HELOC can be placed on your primary residence or on one of your rental properties. Whatever you need to close, you can withdraw the funds and bring them to the closing table. As long as you can afford the monthly payments associated with the withdrawal, a HELOC is an efficient, cost-effective tool.

Asset Sale: Any personal property that you own that has an appraisable value can be sold and the proceeds used for a down payment and closing costs. The asset doesn’t have to be real estate. It can be an automobile or even a rare book collection. As long as your asset can be appraised by an independent third party and documented, selling something you own is an allowable source of cash.