Rental Property Investor · WY · Member since 2016 · 87 posts · 51 votes
I recently found a great buy and hold opportunity close to where I grew up in New Jersey. The home is listed at $85k, but I'm certain I can get it for cheaper. The home will need some improvements, but the comps in the area sit around $150k. I've been approved for a loan and have the needed amount for a downpayment.
Here's the catch: Because this is an investment property and the loan amount is relatively small, I've been approved for is $93,750 (and no less) to 'protect' me from a high cost mortgage.
Here's my question: I'd like to purchase this home for $70k (or less), but need to keep the loan amount at $93,750. Is there a way to get the remaining ~$23,750 back in my pocket somehow?
Can I wrap this delta into the improvements somehow? Is there a way to agree upon a price with the seller and then I receive a "buyer's credit?" Can the difference be used, somehow, towards the downpayment?
Rental Property Investor · WY · Member since 2016 · 87 posts · 51 votes
9y
I'm looking into the 203K loan, as well. But would like to avoid all the red-tape if at all possible. I'm super curious to hear if anyone has some original techniques for pulling this off.
Rental Property Investor · WY · Member since 2016 · 87 posts · 51 votes
9y
@Will Flores It's also my understanding that you have to live in the home for one year in order to qualify for the 203K. Because this would be an investment property out of state, I couldn't pull that off.
Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
9y
No, you can't do it that way. As an observation, if the lender needs to lend a minimum of $93k to avoid the "high costs mtg", which is a problem for Them, not you...this means you are getting hosed on fees and costs, since they need to lend $93k to avoid it due to Their fees.....find a better lender.
Real Estate Broker · Chicago, IL · Member since 2013 · 6k+ posts · 5k+ votes
9y
@James Letchford - Your lender will allow up to 2% closing cost credit, which puts you nowhere near what you need... But you can write the offer and have the $23,750 written to the contractor of your choice at closing. That way it isn't going directly to you.
I have done it a few times for clients of mine, but never higher than $15k so check with your lender and make sure they are ok with it.
Have you considered purchasing the property using hard money and refinancing out? For example, you purchase for 70k using a HML and cash out refi with your lender for 93,750. Some of the 23,750 would get eaten up by HM points and closing costs but it could be an option. You would just need to make sure your conventional lender will do the refi based on appraised value, not the recent purchase price.
Rental Property Investor · WY · Member since 2016 · 87 posts · 51 votes
9y
@Account Closed This is something I was looking for. Is there some sort of $15K threshold that you know about or is this just as far as you've taken it in the past?
Real Estate Broker · Chicago, IL · Member since 2013 · 6k+ posts · 5k+ votes
9y
@James Letchford - it is just the amount we have done. A client of mine is doing a deal now with a $12k closing cost credit and a $12k check being written directly to the contractor of her choosing at closing. According to my lender, he doesn't care what amount it is for as long as it isn't going to her (and the property appraises for the total purchase price with all credits)