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For
the most part, you aren't allowed to borrow to come up
with your down payment. However,
there is an exception. If the loan is secured against
some asset, you can borrow the funds.
For example, if you take out an equity
line on your present house, you can use those funds to
make the down payment on your next home. A lot of people do this when they intend
to rent out their previous home. It also works in case
you aren't certain of the housing market. Since equity
lines are very inexpensive, it is a simple process to line
one up before you put your own house on the market and begin
looking for a new home. That would allow you to make
a "non-contingent" offer, giving you more viability
as a potential buyer.
As long as the loan is secured, you
can borrow for your down payment. If you own a car free and clear, then
get a loan from your credit union against the car, that is
an acceptable source of funds. If you have a stock portfolio
and borrow against it, that is also an acceptable source
of funds.
Of course, the payment on the loan is counted as one of
your obligations when calculating your debt-to-income ratios.
A cash advance against your credit
cards is not a secured loan. Therefore, it is not an acceptable source of funds. Neither
is a signature loan from your credit union. Neither
is a loan from your friend or family member. The loan
must be secured against some asset you own.
copyright 2000 by Terry Light and
RealEstate ABC
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