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tonegastone

Now Or Later?!?!?

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Ok, it looks like I finally qualified to get a loan. The deal goes as such: house appraises at close to 60k, and the seller wants 40k. Can I request a loan for the 60k? Is it recommended to go this route or should I try and purchase at the lower price?

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Tony, you'll want to run your question by a mortgage broker. But, generally speaking, you aren't going to be able to get a loan for more than the purchase price of the house from any lender.

So if the selling price is $40K, that would be the max amount you could hope to receive. And other factors come into play, as well. Your credit history, whether or not this is an investment property or owner occupied, etc. You may very well receive 80% of the purchase price, leaving you needing 8K to close the deal.

Again, speak with a mortgage broker or two and see what is available to you.

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As a straight purchase it will go on the lower of the 2 between Appraisal and Sale price. You would still need 3% into this deal to make it work.

 

I do work with banks where if you take the house sub2, I can do a refi on appraised value upto 90%.

 

Best wishes,

 

Mike

:wacko:

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Ok, I ran it by a broker. Basically what he's saying is he can get me 90% of the appraised value of 63K. Again, the seller wants 40K so I was hoping to get the 20K now and put into the next property. The broker says the most I'd walk away with would be 13K considering the 90%LTV and, yes, my credit.

There was a time when I couldn't get any financing so I'm kinda giddy now that I qualify for ANYTHING. So if I'm gonna use MY credit I think I'll hold off on this one and stick to the script. Make my first investment the home I'll live in. THANKS FOR THE HELP!

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Don't dismiss this deal so fast, Tony. If I am reading this right, you have a mortgage broker who can qualify you to get $53K on a property you can purchase for $40K?

My first question is once this deal is done, what would your plan be? Buy and hold? Put a renter in there long term? If so, will the rent cover you monthly payments? If the answer is yes, why wouldn't you do this deal? You'll have cash flow, tax benefits of ownership, possible long term appreciation, and be rebuilding your credit as you collect the rent and make your payments on time each and every month. Not to mention the $13K in your pocket you can roll into another investment property.

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Do you know if the financing is Owner Occupied or Non-Owner Occupied? That is very important to know.

 

Also, if you can get the house and make 13k, sell it on Rent to Own and maximize your cash flow. Later on when you want another loan wether that house sells or not, atleast you can show that the property is profitable.

 

Always keep in mind on Rental Properties banks build in a 25% vacancy rate. So if you have rents that cover the mortgage after that and even possibly make a profit you will have no problem getting other financing down the road.

 

Mike

:wacko:

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Yep the broker says he can get me 56.7k, that being 90% of 63k....minus the closing costs which he estimated to be 3k and i could net 13k at closing. There's already a renter in there and his rents will cover the mortgage. I'm just looking for some motivation. It's the best house on the block of a "bad" neighborhood.

 

That being said, the problem selling it in the future may be hard but i guess with the tax advantages, and the many people to RTO it to i could pull a few extra bucks and incentive out of it.

 

Whether it's owner occupied or Non-OO i'm imagining the broker may have typed it up as a "non" considering i explained to him what it was i doing....but then again he may have put it in as a "Owner Oc".........none the less what's the difference here?

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As a former loan officer, two things come to mind: first, be careful about the 'bad' neighborhood situation. The deal might sound good but you might want to instigate why the owner is selling for way below market value. Also, find out just how 'bad' bad is.

 

Second, I would suggest that you find another second property to buy before putting this mortgage in place. I dont see the lender just forking over $13,000 to you just like that. I'm not saying it's impossible but maybe more difficult to pull off. If you have another property lined up, they might just let you roll the extra into the new property.

 

If this is your first property or r.e. deal, you may want to consider just getting one property at a time and just go with this one house for now. Get your 'feet wet' and then as you get more experienced you can move onto the next property.

 

I dont mean to sound like 'party pooper' or negative but just be cautious.

 

Another thing is that I've been reading that the housing bubble is going to burst soon. I'm not sure if this applies to the area where you are buying but you may want to hold out just a little longer to get even better deals. With rising interest rates, more people are not going to be able to purchase and the mortgages that promise NOO up to 90 - 100% are going to come at a price - this due to the risk of borrower default. Buyer beware.

 

Please dont let me scare you out of the deal, just go into it heads up. MC's prior post has some good advice and ideas that will work just as well.

 

Happy Investing,

 

Andrew

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