A solid way to minimize / eliminate down payment

In purchasing an investment single family residence, here is the fact: if you have income that is stated rather than verified, almost all lenders today require at least a 5% to 10% down payment, depending on your financial reserves and your experience with investment property. You may know a local lender who will give you an investment property loan with no down payment and no proof of your income, but this is very rare. Most of you do not have access to this kind of loan.

So is there a solution that does not require anything fraudulent or illegal? You bet there is. There are now a handful of specialized loan companies in the U.S. who will provide you with the down payment AND other closing costs ABOVE BOARD, who are accepted by many lenders. I call these "closing cost lenders". Ask your mortgage broker or lender about it, and if they don't know how to do it, call me. I have just established a relationship with one such closing cost lender.

The way it works is this: The 5% or 10% down payment and closing costs are paid to the buyer by the closing cost lender. They are then paid right back to the closing cost lender from the escrow account at the close of escrow. So this is completely above board and transparent, and therefore legal so far as I know.

There are several simple requirements to be met in order to do this: 1) The seller must cooperate. 2) The appraised value of the property has to be higher than the selling price by an amount equal to the closing cost loan. 3) the lender has to approve the loan with "unseasoned" assets.

Most lenders won't approve unseasoned assets with 5% down, on a stated income investment property loan, but there is an easy way to solve that. Just increase the down payment to 10% or whatever the lender requires. This requires a higher appraisal and more money borrowed from the closing cost lender, but if the appraisal is there, it is probably worth doing.

The closing cost lenders are not cheap, but since the loan is only for a few weeks, their high rate is not a problem.

I did not know about this myself until recently, so I would not be surprised if most brokers and lenders are not familiar with this method.