if i found a propety for $65k and it appraised for say $65k could i offer the seller $65k with $8k cash due back to me at closing, minus closing cost
$8k you can call a decorative allowance!
and out of the decorative allowance can i pay the closing cost
No not really! That will be yours after closing! What kinda loan do you have?
none at the moment but looking for options to buy rentals and maybe come out with a little cash for holding or repairs, my credit is good (i think) and would like to do 100% LTV N/O/O…But when you buy any property u can ask that the seller pay closing cost…wich would be great but it would be even better if he would pay closing cost and give me a little cash back if I gave him his asking price…being that the appraisal came inline
it should work fine. the lender will send an appraiser out AFTER you apply for the loan (for a federally related transaction the lender has to order the appraisal, not the borrower). do up the contract at $65,000 with $8,000 allowance (if you hide from the lender that you’re getting $8,000 back that’s fraud, but alot of people do it).
as long as the appraiser has comps for $65,000 that are similar, you shouldn’t have any problem getting a $65,000 appraisal. if all of the comps are around $57,000 (which is what you’re really buying the property for) there may be a problem unless your lender uses a fraudulent appraiser (which also happens way too often).
some lenders don’t like allowances so you may have to call it non recurring closing costs.
The more important question here is why would you want to do this “deal”. Where’s the profit? Paying retail isn’t a formula for success in real estate investing. Do a little work and find houses that can be bought at a discount!
In addition, most banks and HMLs will not loan at 100% LTV on investment properties. Typically, banks and HMLs won’t lend at more than 70% LTV.
Finally, as others have said, hiding cash back from the lender is fraud. Even though others may do it - JUST SAY NO! Doing jail time is no way to start a career!
Not trying to hid anything just get money back at closing this property would be a rental not a flip
other options to get your cash at closing (that are legal):
1-seller pays closing costs at like 6%, and keep your actual costs at 2-3% (this won’t work well on a $65,000 property, but keep it in mind for future, bigger deals, because its super simple and causes zero problems)
2-use a 3rd party grant program to get however much cash you can out of the deal. there is a small fee, but have the seller pay it. your lender and everyone can know about it. (make sure your lender will allow gift funds–IF you plan to use it as a down payment).
Can you use a gift fund for a down payment on rentals? if so do you know of 1
I have called a lot of lenders looking for ways to do this, and I can’t come up with anything other than pay the closing costs out of pocket and then refi if you want your money back. I have call A LOT of lenders, and I consistenly get 2 things:
There can be no seller concessions, i.e. - cash back for any reason, including fix up, closing costs, or any other creative thing you can run past them. Lenders will only knowingly lend the amount of actual purchase - unless you do a 203K loan, which is a headache I’ve chosen to avoid.
Sellers can only contribute up to 2% of the purchase price towards closing costs. When you’re buying 40-60K properties, that doesn’t help much.
Someone said most lenders won’t loan 100% LTV on investment properties. That is way far from accurate. As long as you have good credit, lenders will line up to do 80/20 loans for you on investment properties.
I’d love to find an honest way to close properties with no money out of pocket, but so far I haven’t found any lenders who will do both no DP and finance in closing costs on an investment property. If this is your first purchase and you are willing to live in a unit, you can buy a 1-4 unit property through a bank on an 80/20 with closing costs financed, but I’m not in that position.
tara grant. i think they may only work in colo.
http://www.lassitermortgage.com/tara-grant.html this website has a little info on tara grant.
sellers can contribute 6% to closing costs, at least in colorado.
i’ll be closing on 2 properties next month, each using a tara grant for cash back and 100% financing (sellers are paying my closing costs). total investment $1000 earnest money each, and getting roughly $60k total at closings. its worth mentioning that these are $300k and $500k properties, with enough equity to get that kind of cash back. SO IT CAN BE DONE. it would be hard if not impossible to get that much cash back when purchasing a 50-100k property.
It is VERY easy to get a loan that will not only allow you to have zero out of pocket but also to receive cash back at closing. I have done it many times and so have many others on this board (REOConsultants for one).
The key to doing this is to buy at a discount. That’s why I asked Islander in an earlier post why he would want to pay the appraised value for an investment property. Paying retail is no way to make money in real estate investing (unless you’re speculating on appreciation). If you buy at a BIG discount, you can find a small local bank that will loan you everything for the property (including closing costs) and hand you a check at closing. In these cases, you are borrowing more than 100% of the purchase price, but may only be borrowing 65-70% of the appraised value (LTV).
Of course, all of this depends on having excellent credit and reasonable income. If you have no money and no credit, it won’t happen!
Enlighten me. I hope you are right, b/c I would love to get cash back at close, but I’ve looked and never found a way to do it. I’ve had multiple lenders say “I’m not suggesting you do it, but people get money back outside of closing all the time. I just can’t know about it.” That doesn’t cut it for me though. I have 90K income and 750ish credit, but I haven’t found it out there after quite a bit of looking. I’m not saying your wrong, but I will definitely disagree w/ your term “easy”.
You mentioned “small banks”. 1)what difference does that make? and 2)what questions do I ask upon calling to find out what their policies are w/out having to get preapproved at every bank I call? and 3)if I do find lenders who lend above purchase price, what does that do to closing costs and int.rate?
Does that mean Ohio State Buckeyes??? GO BUCKS!
Anyway, Yes it is easy - I’ve done it many times!!!
The reason to use small, local banks is that they make their own decisions. If you go to a big national bank, the local people can’t do anything outside their “norm”. They are merely cogs in a machine. They are bound by big company policies, a bunch of red tape, loan committees, etc.
Are you a member of your local REIA? If not, you’re making a HUGH mistake!!! Your local REIA is an indispensable source of valuable information. In fact, I’d venture to say that the answer to your question is at your local REIA. Someone at your REIA knows exactly which local bank does cash back at closing and exactly who to talk to at that bank!!! I’ll say that again - SOMEONE AT YOUR LOCAL REIA KNOWS EXACTLY WHICH LOCAL BANK DOES CASH BACK AT CLOSING AND EXACTLY WHO TO TALK TO AT THAT BANK!!! Is that powerful stuff or what? All you’ve got to do is go to the meeting and ask. It IS just that simple.
I would NOT start calling local banks and asking them if they’ll give you cash back at closing. They’ll all probably say no or maybe even laugh. You don’t need to talk to a loan officer - you need to talk to the decision maker - like the president, vice-president, or chief loan officer at the bank. Set up an appointment and talk to them in person.
Finally, getting cash back at closing has absolutely nothing to do with closing costs or interest rates. I usually pay about $500 to the bank as a loan origination fee and 6.75% interest on the commercial loan. Try getting that from a mortgage broker!!!
What you need is a contact at the bank. You aren’t going to get that on a website. Join your local REIA!!!
I have 701 credit score, 90k income and am buying a house for $37000 ( appraises at $68k). I have been through small local banks and mortgage brokers and can’t seem to find a way to get cash back at closing. I would love to squeeze $5k of cash back money to sit in my investment account on these properties but EVERYONE I talk to says “impossible”.
I’m not currently a reia member, though I would love to be. The problem is, I live in Pittsburgh but am investing only in Columbus, home of the Almighty Buckeyes. The Columbus REIA meetings are all on Tuesdays, and I can’t possibly make it out of state on Tuesdays. I may eventually start going to PREIA meetings, but my benefit is cut in half by this.
Thanks for the info. A buddy of mine (cecsix on this site) just today called me and said he found a mortgage broker that would do cash back, higher closing costs, but a step in the right direction.
hey buckeyes welcome back!!!
The only reason he charges more in closing cost's is that he knows how to do it and some investors do not!!!!! I could save you $$ and get it done cheaper with no profit to me just because I am tired of watching people take advantage of people that do not know what is going on!!!!
Just curious - why would you live in Pittsburgh and invest in Columbus? Why not just invest in Pittsburgh? It is much easier to invest close to home.
Thanks for the welcome back. I changed companies and relocated, so things have been hectic for a while. I’m getting back in the swing again now, though. I’m going to talk to the lender my buddy found that does cash back, but any advice on getting it done cheaper, you know I’ll take. Cecsix and I just made a 1K bet on who could accumulate 20 profitable properties first, so I’ve got to get cooking.
I started investing in Cols., am about to close on my 5th unit in a couple weeks. One of my best friends owns rentals in Columbus (about 10) and manages about 40 others, plus my few. He’s a traveling Lowe’s on wheels and far more capable of maintenance than I, so it just makes it very easy. We have a reasonable deal worked out that is profitable for both of us, and it leaves me free to concentrate on buying in my little bit of free time instead of worrying about management.