Financial Engineering Re: Closing on first property

[Victor S.]

Hi, all.

Just signed a contract on my very first property today. To give you some info on the property. It sits on an acre lot in an older neighborhood (variety of houses of different sizes). Has been on the market for quite a few months, but the starting price was 57% more for what we are trying to close it for. It will be my primary residency. 

With that said, it does need repairs and updating. It's fully livable as is, but I, of course, would want to pretty it up: rip the carpets and finish the upstairs bedroom, which was advertised as an attic, but used to be a bedroom before, but currently needs walls and flooring at a minimum. Has another "storage" room that needs some flooring and prettying up. The floor plan itself is quirky, but will work for a single bachelor just fine, though I somewhat worry about future buyers (If I do end up selling it) and their preferences. It has another interesting aspect that I will disclose later, if the deal goes thru closing. 

With that said, I am debating on how to approach the % down and funding for future repairs. I do have the potential to put 20% down via a combo of my 401k and cash. If the property appraises as high as we think, I will be sitting in plenty equity and should have future heloc potential for some multi-fam investments down the road. I would like to tackle the repairs myself (and occasional friends help) vs financing via 203k or homestyle. I have "some" skills, as I've volunteered on rebuilding (not from the ground-up) homes before, but never done anything solo. Home Depot/Lowes currently have some good offers on 0% for 24 months, so I will be def. looking into this. 

I was also thinking about using my CCs for closing costs (about 5% of PP) via 0% balance transfers and continuing my stock investments (praying Trump won't Trump this up) with the cash on hand. That would put my CC utilization at about 6.5% and allow to keep the cash for other uses.

Owners are also leaving a ton of "garbage" behind them, so might be able to score couple of hundred bucks on just metal/garage sale stuff alone lol

Let me know what you Pros think, please. Thanks!

[Christopher Phillips]

Don't do balance transfers.

If you're applying for a home loan, you have to show you have the ability to pay for the down payment and the closing costs.

The funds will need to be in there long enough for you to do a certified check.

The bank will check your account balances and will question the sudden access to funds. Even though your utilization will be low, using credit cards (ignoring paying for the inspection and the appraisal) to buy a house is a bad sign and can risk having your mortgage rejected.

If you are ultimately trying to go the 20% down route, talk to you lender about other solutions so you can do the closing costs the right way. One option would be lender credit to help with the closing costs. You could have asked for seller help with closing costs, but you already signed the contract. Another option would be to add some of the closing costs to the loan so that you can use your cash/401K for the 20% down payment and avoid PMI.