Help with my lease option/mortgage situation

[Rodger Fore]

Hey yall,

I am in San Antonio, Texas. I have been looking into real estate and stumbled across Bigger Pockets and now I am obsessed and am putting together a plan. In 2012, my sister and brother-in-law were looking to sell. I had money that was put away for me for college and was growing in the stock market. I was not able to get a conventional loan at the time without a job history. The agreement was that I buy them out of their equity 30k and agree to make their mortgage payments and when I was ready to buy the home I would buy the house at the 2012 FMV which was 145K. So fast forward to today. I am married have 2 kids and have graduated college. We both have a 2 year job history and would definitely get approved for a loan. We have made some improvements to the house over the years, knocked out a wall for a open floor plan, laminate flooring, and a new roof (thank you hail damage). All has been paid out of pocket. Now there is 100k left on the initial mortgage and I believe the home is worth at least 215k. Zillow says it is worth 225k and Trulia says 228k. I am airing on the side of caution saying 215k.

So now for my question.  I do plan to stay in the house for at least another year but I plan for this to become a rental sooner rather than later. I want to find the best way(saving money) to put the home in my name while getting the equity out to be able to invest in real estate.  So I have been talking to banks namely big banks and I get different answers depending on who I talk to.

Option 1- Is to buy it with a FHA loan put 3.5% down on the house, then in 6 months refinance with a 30 year cash out and take 70-80% of the equity out.

Option 2- Is pretty much the same as option 1 but to get a FHA 203k 30 year loan and try to squeeze as much forced appreciation out with updating counter tops, bathrooms, new paint on the outside, new water heater, installing a water softener and possibly new AC. Then a 30 year cash out refinance.

Option 3- There was a talk of assuming the loan and we are currently looking into this option. The current VA loan does not have a favorable rate 7.125%. So then we would do a cash out refinance to a 30 year fixed rate mortgage at around a 4.351%. This option is the only option where I am not paying double closing costs. There is still a cost for the assumption but not as high.

Thank you for any insight you can give.  The key factor is the best way to go about getting the equity out of the house so I can put it to work.  Thank you!

[Nicholas Covington]

Option 3 would be based on the lender, although VA loans are assumable that is not always the actual case with the lender that initiated it. I honestly can't believe their rate is that high still, what a waste of money.

The easiest way really would just be to buy the property from them, if you want some money to do renovations later on you can just take out a HELOC since it will be your primary residence. A 203K loan is a headache...