My grandmother wants to sell me her duplex with one renter already in it, which of course would make it a owner occupied investment property. I had the property appraised and it is worth $125,000 which per the appraiser is below market value for the neighborhood because of the work that the home needs. It will take about 30,000 dollars worth of work to update the duplex (per my home inspector and contractor). Since my grandmother doesn’t want to do the work before she sells it to me, I have offered her 50,000 for the property and she is fine with that. She is also willing to quitclaim deed the house over to me first so that I can work on my credit score which is in the middle 600 and I heard you need at least at 680 to refinance. My question is do I do a cash out refinance or should I tell her not to deed the house over to me and do a first time home buyer mortgage?
If the place is really worth $125,000, and all your grandmother wants is $50,000, you only need a loan for 40% of the house’s value. That’s a very low risk loan for a bank to engage in…if you think about it. I would bet there are some banks out there that would work with you, as long as you have some method of paying off that loan - a decent job or stream of income. I would call a few banks and talk with some loan officers, and also talk with a couple mortgage brokers who handle cash out refi’s … as they tend to deal with a whole bunch of banks and can give you an idea or not if it’s possible. I bet it is.