Deal In Trouble!
I recently put an offer on a 4 unit property with a positive cash flow.
I have NO money of my own to put into the deal.
I found a FHA mortgage company that uses a down payment grant assistants program to cover 3% down and the closing cost….basically the seller pays the grant back with a fee and I offer more so that the seller gets full price!
Anyhow, the bank came back and said that I need 3 mo. PITI in my account. This kind of defeats the purpose of the grant assistant program.
Price $54000
Offer is for $60600 to cover the grant assistant program.
$1600 mo. comming in if I occupy one unit!
Any ideas of how to remedy this situation?
I have very limited resources.
I thought about trying to find a co-signer with $1900 in a account but I don’t know of anyone in my area that has that much in an account.
I would also consider help from investors!
Ant thought or ideas would be greatly appretiated!
Thanks in Advance!
John Keegan
**Please See My Profile**
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Who ownes the property?
What is FMV?
You say it is a grant, grants you do not have to pay back thats why they are called grants. Do you mean a down payment assisted program?
If you only need the money in your account and you dont have to use it. Can you borrow from several people cause they will get it back after they check?
[addsig]
If you are over paying for the house then firstly it isnt a good deal, and secondly you wont be able to get that much loaned to you once he appraisal comes in. I am assuming I am missing something in the equation and you will ake it work out. If the seller is making out that well, I would have him put the money in the bank to take care of it. If he is not amicable then make it a cash back after closing arrangement. The cash flow does look good as a gross amount, make sure you have figured in expenses as well though.
To raise that much cash quickly, you will definitely need to find someone else to get it for you or put something in hock. Another way is to get an equity line with your bank, if you are able. There are also secondary lending sources but you will pay higher interest rates and could be losing money until its paid off.
If there is room on the land to expand you could get a construction loan as well and maybe add another unit or improve the value of the property somehow to get a higher rental amount as well. The main thing is that you want to raise the FMV(Fair Market Value) so that you can refi for better rates and also make it a better deal than paying full price.
Most people here including myself would walk away from it rather than pay full price for it, but you may know something that we dont.
Hope that helps,
Kyle
OK, I've had too many loans like this come across my desk. Here's what you could do:
First, there is no "grant" involved. The seller is contributing 3% to a non-profit who, after taking out their fee of $500-$750 will gift the rest to you towards your transaction. This is a stupid arrangement for loan risk, but in any event as long as the home appraises it makes the deal happen.
Second, the 3 months PITI is an FHA requirement. You can't simply borrower money from a friend, take a cash-advance, or find mattress money and deposit it into the account. If you do, the current balance will be much higher than the average balance and the underwriter will kill the deal.
So, since you don't really plan on using the 3 months PITI as cash in the transaction, you go find a relative or trusty friend who has at least that amount of money in the bank. You ask them to add your name to the account, which requires signing a new signature card. Hopefully the account isn't a brand new account, and hopefully they have a nice balance that on average is in the account.
Give the bank name, address and account number to your lender, who will mail or fax a deposit verification to the bank. The bank will look up the account number, see your name and social security number on the account, and verify the funds.
When the verification comes back, your relative goes and takes your name off the account.
Now you can judge for yourself if this is legitimate or not. In any event, it makes the deal happen. It is no different than a young person building their credit by being an authorized signer on their parents account. It's not really their account, but they get credit for it.
I can't think of any other way for you to come up with money that will pass the underwriter's approval, because you still need a seasoned bank account with a sensible current and average balance.
Great info DecisionMan, thanks