Can one borrow the down payment for a condo?

Is it possibe to borrow some or all of a 10% down payment for a condo? I realize it may depend on the by-laws of the condo assoc and will be researching this tonight, though if possble, what would be the possible ways to do this?
1) personal loan?
2) loan from an individual (friend, relative)?
3) mortgage broker/lender?

Other important factors: down payment is needed quickly, yet condo is pre-construction so closing will not be for another 18 months.

Thank you in advance for your thoughts/ideas!

Well while theoretically you could borrow the down payment from a friend or relative, in order for the bank to finance the other 90% you generally have to be financially qualified. Also bear in mind that closing costs for this kind of condo will run you very high, so yo need that as well.

how would the condo know?

I don't know if the bank will let you do it. Or if they do, it will split it 80-20% and the 20% will be a home equity loan at a higher rate. If you can't afford the 10%, then you probably can't afford this property in the bank's eyes. Don't forget you'll need reserve funds as well. Call a mortgage broker.

I wouldn't worry about the condo. I would worry about the bank. Banks really don't like you to borrow down payments, because it is too much leverage.

Thank you all - I am #1 - I will be able to make the payments on this mortgage (especially by the time it closes), though do not have saving now for the down payment. I do have about have access to about 1/3 of the down payment (some savings, could borrow against 401(k) and then try to get the rest from firend/relative or personal loan) - just wondering if there would be a lender out there would could help with this type of thing, also.

Would a mortgage broker be able to help? Thanks again.

It sounds like you are not ready yet. 401k sometimes doesn't help either in what you qualify for. I would suggest you reduce your 401k a little and save. I would suggest you have 20% so you have 10% down, emergency cash and closing costs which can be substantial.

to post 1: buying with no money down is not good right now, do not listen to any broker on this, for they just want to separate you from your money asap. Rates will go up, housing will go down, you will be burnt.

Before that, if you are a sup prime borrower, you will not able to do it. Do your homework and calculate the total interest you will pay over the life of the loan, THEN you will see it is not such a good idea. If you are taking an ARM, adjustable, please, read bellow:
On subprime mortgages: http://www.msnbc.msn.com/id/17650758/
On risky loans and USA depression: http://www.msnbc.msn.com/id/17632793/
On suprime borrowers not being able to follow up w payments http://www.msnbc.msn.com/id/17652108/

Please, note, 4 out of 5 borrowers of downpayment for a home end up in foreclosure

to post #8, if the person is going to take a fixed loan, how will he be burnt??

It sounds like you are cutting it cost and this condo is beyond your means. My eyebrows raised when you spoke about borrowing against 401k etc. . ..sum up all the costs including the very high closing costs of new construction. . . .when the loan starts ticking, you can avoid the monthly ownership costs, mortgage and taxes on your own?

You also have to have cash to cover your closing costs, for a new construction condo that could be 5% of the purchase price. And very often you can get a much, much better deal on a mortgage if you are willing to pay a point or two at closing.

I wouldn't even consider buying unless I had 20% of the purchae price available.

You also have to have some concern for what happens if you lose your job, yur income declines, you have unanticipated expenses, etc. You don't want to be caught with no cash on hand.

poster #11 - lots of typos due to quick typing - please read the corrected message here:

It sounds like you are cutting it close and this condo is beyond your means. My eyebrows rose when you spoke about borrowing against 401k etc. . ..sum up all the costs including the very high closing costs of new construction. . . .when the loan starts ticking, you can afford the monthly ownership costs, mortgage and taxes on your own?

7 here, i agree with 11 and 12... you need to save more or ask family for money.

Yes I must agree that it doesnt seem like the right time for you

According to the housing bulls on here, "nobody" finances in Manhattan like the original poster. QUACK QUACK - there goes another canard. OP: I'd suggest renting. *BARFS*

Here is from a mortgage banker
Housing "nightmare" tarnishes the American dream
http://biz.yahoo.com/rb/070318/usa_subprime_dream.html?.v=4

#16 it seems you cannot stomack foie gras, just don't do it! BTW are you a broker?

Best housing crass analysis and news outside Wall St
http://patrick.net/

Your mom would say absolutely no
http://www.msnbc.msn.com/id/17609930/

interesting... but the article doesn't really pertain to Manhattan real estate. Sales have been strong versus the entire nation. I honestly doubt a real estate collapse with prices falling over the next few months

I think no one knows what pertains to the future yet. . .that's why it is in the future. . .

anoyone pushing you to buy no money down has a vested interest in your doing so.

Different question: Why is borrowing against your 401K considered 'bad'? If it's not to make up the 20% down payment but to increase it to say 25%, I don't see the downside. You're paying yourself back the interest rate, which is typically much higher than a mortgage rate and as you're paying yourself back, you keep your money in the market, somewhat. Of course, there's downside - if you lose your job, etc. you'll need to take a huge tax hit if you can't pay the loan back. Can someone give some insights on this? Thanks.

I don't think borrowing from your 401k is bad either. They make special "first-time buyer" loans for this very reason, with interests rates around 4-4.5%.

O.P. should check to see if his 401k has a special "first-time buyer" withdraw policy where s/he can withdraw and pay taxes, but no early withdraw fees. Then there's no extra interest to be paid and no extra money owed when broakers do a credit check.

My question: Why are closing costs higher on a new-construction property then when you buy someone's older apt?

transfer tax? about 1% of the purchase price

to #1. How much is the condo and how much is your salary. What you *think* yoiu can afford and what you can in reality might be completely different.

You don't want to pull from 401k because you'll have all your eggs in one basket.

i have heard extra tax/fees from new development are about 1.8%

if you have to pull from 401k, manhattan real estate is not for you - and yes it means you are very concentrated in your investments

Yes borrow all the down payment and get hooked up with a interest only loan.... really
the ONLY way to go!!

Actually, I share the original poster's question. I am a recent law school grad and my wife is a new doctor. So our incomes are slightly over $250k total (before bonuses), but we haven't had time to save up. We have about 7% of the down payment and we have our eye on a new development for $780k. We'll have the 5% in closing costs by closing and also the full 10% down payment by closing. But the sponsor won't accept just 7% and we're afraid the place will be signed by the time we have the full 10%. Is there something we can do?

It will be at least 5-6% of the purchase price after all the taxes, fees and nickel and diming.

expect about 4-5% times the total cost for closing in new dev; specifcally: 1% mansion tax, .01425 to .01825 transfer tax and another 1.5% mortgage tax.

32 here, 33 might be correct as it may be slightly lower depending on what you're buying and how much you're borrowing.

NYC GOVERNMENT WEBSITE REGARDING MORTGAGE TAX STATES:

Tax Rates
There is a Statewide mortgage recording tax as well as the New York City mortgage recording tax applicable to mortgages recorded in the City of New York. The aggregate applicable rates are as follows:

* Where the principal amount of the mortgage is less than $500,000, the tax rate is $2.05 for each $100, or major fraction thereof, of the principal amount. However, if the mortgage provides that the property to be covered is a one- or two-family house, the tax is reduced by $0.30 for each $100 of the first $10,000 of the principal amount.
* Where the principal amount of the mortgage is $500,000 or more and the property to be covered is a one-, two-, or three-family house or individual residential condominium unit, the tax rate is $2.175 for each $100, or major fraction thereof, of the principal amount. Again, however, if the mortgage provides that the property to be covered is a one- or two-family house, the tax is reduced by $0.30 for each $100 of the first $10,000 of the principal amount.
* Where the principal amount of the mortgage is $500,000 or more and the property to be covered is not a one-, two, or three-family house or individual residential condominium unit, the tax rate is $2.80 for each $100, or major fraction thereof, of the principal amount.

Sorry, back to the 401K question...Most 401K's have caps for loans like 50K. So I don't get the putting all your eggs in one basket story. If you have a largish amount in your 401K, 50K is not that much. More thoughts on this other than 'manhattan real estate is not for you'?

I agree with #36. Taking out part of your retirement can be what puts you "over the hump". For example, I'm looking in a cheap market (under $350,000) and only need about $10K more to cover the down payment and closing costs (although I'm learning I may need more than I originally thought). I'm young and don't have much in retirement, but enough that borrowing $10K from myself at 4.25% is going to help me get into my own place. Why wouldn't I? Otherwise I might have to wait another 8-10 months to save that up. 10 more months of throwing $1500 a month away.

If I'm way off on some microeconomic point here, please enlighten me.

#31 - either continuing renting to save up, or find a cheaper apt. Stretch yourself too thin now and you may end up regretting it

Look there are a lot of unexpected costs from home ownership. If you're already borrowing to leverage yourself higher, you probably have no emergency cash. I would save that 401k loan as an emergency if my emergency cash ran out.

I sincerely think that the bank will not give you a loan if you need to borrow against your 401k. Some didn't consider it as an asset for me on my first home. You realize that if you need to sell the place, it could take several months? Do you have the emergency cash for such a situation? Crunch the numbers a bit more...

1 here, thank you all for this discussion - wanted to update you on where I am in the process: I spoke with lenders and each would approve me for 100% financing, though that would be a stretch for me financially, and more importantly, it would not work with how this arrangement is setup: the Sponsor requires 10% down at signing (in one week) and the balance at closing so 100% financing won't work. Only option was to come up with the down payment - I was able to borrow the down payment from a relative and am going that route. FYI: Condo is about $575 and income is about $125. There are some other risks invovled - will provide later when I more time. Thanks again all!

best of luck!!

It sounds like you stretched yourself. I am glad the condo requires 10% at signing as all do in NY. Sorry but that is to protect you from yourself. 100% financing is riddled with risk and says a lot about your ability to afford. Do you have bonus above $125k I hope? You are going to live tightly.

Also dont forget about your closing costs which will reach about 5% of total for a new dev.

Seems like you got it resolved, but to other posters about 401k... It's never a good idea to borrow in order to borrow. That's what you're doing if you have to borrow from yourself in order to borrow from the bank. Also, your 401k is meant to be for retirement. You don't want to borrow against your well being in retirement. I'm 24 and I have about 15k in retirement. I want to give that money time to grow and continue with contributions. If anything, it'd be better to stop contributions for a time, but not to take out money you put away for your future. Just pretend that money doesn't even exist until you're ready to retire! I'd rather wait and save some more or settle for something a little cheaper, a little smaller, a little farther from where I want to be. If you're desperate to buy, something's gotta give - but not your retirement!

You are borrowing $575,000 (10% from family and 90% from a bank) on a $125,000 salary? That is way too much leverage. You are borowing more than 4.5 times you income! I think you are making a mistake.

To #37 - I've been looking in the same price range. In 10 months in that price range you probably would have paid less than $2000 in principle and tens of thousands in interest - or about the same as your rent, but at the end of 10 mos you'd have 2k in equity and owe yourself money too. I think it'd be worth it to wait.

dont listen to #46 -- if you are young, with good income upside and few other obligations, then take the risk! I have been in NYC for 15yrs and have slowly built over $1M in liquid assets all from RE purchases that I couldnt afford at the time. Each time it was my primary residence, was a stretch and produced 30-50% returns . . . in the mid-term real estate is still solid.

I didn't realize that condos have down payment requirements -- I thought that's strictly a coop thing. So basically if a lender will cough up 125% LTV, you're good to go. Not that I think that's a smart way to go, but that's not what the OP is asking.

#49--even if that were the case (which wouldnt happen in nyc) you still need to come up with the downpayment within a few days.

to #48 - You must have bought in the early 90's which was the bottom of the cycle. If you had instead bought at the top of the prior cycle 87-89, I wonder how much you would have had in 2002. I really dont think anyone would say 2002 - 2004 was a 'normal' market as it was only driven by artifically low rates and lax lending

If you are borrowing $575,000 and are doing an interest only, at today's rates you will be paying about $2800 a month in interest. Plus your real estate tax, plus your common charges (likely $1000 a month, at least). Does this even leave you enough to eat?

I make $110k plus commission and I have $180 for a downpayment and am looking at apts for $400. Why would you put yourself in so much debt?

10% down off 575 so 525 mortgage. 125k makes over 6g a month before 401k.

7 here, see we were right... but family's usually a nice lifeline.

OP borrowed the downpayment! It wasn't gifted to him. He is borrowing 100% of the price.

He has 10K a month for taxes, retirement savings, health insurance, disability insurance, food, transportation, and still needs $4,800 MINIMUM a month to cover his housing. Insane!

I am hoping his salary is 125k and he gets more in a bonus?

$125k is BEFORE TAXES

To #47, this is #37 - I agree with what you're saying, but as it is, all or most of that interest is also tax deductable which in my case would take me from a negative $2000 to a positive...what? 2K, 4K. That money can pay back a big chunk on the loan or if I get the right mortgage, can go to additional payments.

So, I'm basically even as I would be renting, and within 2 years that laon on my 401k is paid off and, most importantly, I own my own home! How much is that worth in peace of mind?

the 6g a month income is after taxes. 125k is like 10g a month before tax benefits.

err correction: 125k is like 10g a month. and don't forget tax benefits of buying

If you can REALLY afford it and you have backup cash to keep you afloat while you wait to sell... then you should do it because the window to buy may only be open for a little while. If you're tight month to month and have no cash on hand, then don't do it.