Creative Financing Idea - Is this doable?

[Eric Telese]

Hey everyone!

I have a question on a creative financing idea that I have been told about. I live in NY and wondering if this situation would be doable/legal:

I have access to a very distressed home that I want to make my primary for a few years. I'm hoping to be able to agree upon $300k (very, very cheap for where I live). I could then ask them to increase purchase price to $350k but with $50k seller credit at closing (they still get their agreed $300). Bank lends me $350k and I put down 5% ($17,500) with a small $105 monthly PMI payment. Plus probably $20k closing costs brings me to ~$40k out of pocket. Now i get the $50k credit at closing that not only covers my DP & closing costs, but I get paid $10k and can use that on repairs. I would have 5% equity in a home that will easily be worth $100k more after some easy repairs. Which then brings my LTV to say 75% and I could even get the PMI dropped depending on the lender if I pay for a new appraisal after capital improvements.

It sounds like an amazing idea but also something about it sounds sketchy to me. I was just made aware of possible seller repair/closing credit caps. I am trying to find out what percentage those are here in NY, because that would throw out the $50k credit idea.

The house is really a complete rehab and the seller will not perform any repairs. I might look into renovation loans but I wanted to do most of the work myself to save substantially and I'm not sure that is allowed with those loans. Also the rate would be higher.

Any other opinions on how to make something like this work?