Taking Money Out At Closing
I have a property that I want to purchase at a price of $39,000. My mortgage broker is telling the lender is asking that the loan be at least $50,000. At closing I was thinking that I would walk away with $11,000 & could use those funds to purchae another property, but my broker is telling me that money would go to the seller unless I have it written into the contract. This is my first property, but I don't know how that would be possible. Please HELP. I'm in Charlotte, NC
You pay the seller their money they asked for, the the remainder is yours. It is your name on the loan. Might be hard to get this one through. Some lenders allow this paractice of getting money back at closing, most do not. The house also has to appraise high enough to get the lenders LTV ratio right. If the house is worth this much, why did the seller not sell it for more?
Repairs have been estimated at around $5000. That's the only reason I could think of. So some lenders will allow cash at closing & some do not?
I am currently purchasing four properties. In order to help pay for costs the sellers originally agreed to assist and give me about 5% of the purchase price, after we increased the sales price by 5%. However, the lender frowned on that and would only allow 2% assist. In order to get around that we created a promissory note between us and the sellers. At closing they will give me a certified check in the amount of 5% of the purchase price. This might be a way around it.
Quote:
On 2004-01-06 15:08, geovest wrote:
However, the lender frowned on that and would only allow 2% assist. In order to get around that we created a promissory note between us and the sellers. At closing they will give me a certified check in the amount of 5% of the purchase price. This might be a way around it.
Geovest,
Is this promissory note going to be disclosed to the lender?
I'm not sure they are going to let you do that. I think what they were saying is that they only want to do loans of 50k or higher. That being the case you are going to have to have the property appraised at 60 + to get your 20% in and still have a loan amount of 50k.
Additionally, most lenders do NOT want to see a purchaser get money back at closing. You can get around this by having the seller raise the selling price and enter into an agreement with you to give you a check for the difference, after the closing. The money back CANNOT appear on the HUD statement.
There are ways to do it, just be creative.
Goodluck!
The promissory note will not be disclosed to the lender and it isn't part of the purchase agreement - it was actually the mortgage broker that suggested that I do it this way.
Maybe qcincharge could write the purchase agreement for $50K and have a separate agreement on the side for the sellers to pay back $11K.
So is a promossory note a legally binding agreement?
The promissory note is a legally binding agreement although you do sign a paper stating there is no other agreements and such so it could be construed as loan fraud. It is possible to do but might be frowned upon depending on how you deal with it.
Good Luck
Get this, I just got back from chatting with a home owner who wants to sell. They have almost no equity.
My first instinct was to take it subject 2 but the owners were VERY against that idea. So I brain stormed and ended working a deal where I give them $1500 for there equity and buy the house through traditional financing.
I purchase the house for 234k and hand them $1500 bucks, I then turn around and pay off there mortgage of 210k. I handle all other closing costs and the excise tax.
Once the contract/note is worded right I walk away with at least 12k in my pocket at closing. Now what? Turn around and sell it for a marked up price via owner financing, collect another 15k down from my new buyer. Bingo 27k in my pocket right up front..
So er umm if you find a creative mortgage broker who will work with you, and you word the deal right, it’s VERY possible to get money at closing.
I haven’t field tested this yet but I assure you I will get it to work in the next couple weeks.
On a side note, I’ve come a hell of a long ways in the past couple months that I have belonged to this bored. Holy cow, this actually IS possible! As Nike says, Just Do It.
Hi Telemon,
when you say "You can get around this by having the seller raise the selling price and enter into an agreement with you to give you a check for the difference, after the closing. "
Does this not mean a tax implication for the seller? For example if the seller is selling his house for 100000 and you and seller agree to a 10000 at closing so you put a purchase agreement for 110000 and this is what the lender sees and www.finances.Now is this not the taxable value for the seller?
and secondly when the deed is recorded with the sale price is the sale price at 100000 or 110000?
Just a bit confused on how it works..