REO financing

I’m currently looking at purchasing a couple of REO properties and know that the banks usually require proof of funds. Does this mean they want an all cash deal or will a prequal letter satisfy them. Or do the banks want something more. I’m assuming the closing is pretty traditional in one of these deals. Any info would be appreciative. If it matters I’m in Georgia.

Thanks

Hello,

It depends on what you wnt to do. If you are doing cash then yes you need proof of funds, if you are financing, most will want a pre-approval from a lender.

But they don’t care about conventional financing.

I’m sure all they want is proof that you can pay - whatever form that may come in. I’d say a prequal letter should do fine. How about asking them?

Sorry this is not a response, but a question. If yo don’t mind please help. I am looking at a couple of REO’s here in Alabama. Should I offer to pay what the bank is aking or bid low on these properties???

I am assuming that you have already had someone review your situation and confirm that you qualify for a loan. Have them type a pre-approval letter for you.

I am not sure that a prequalification letter will suffice.

Thanks for the info. I have been prequalified and will send them a prequal letter with the offer. I do have another question on this topic. Lets say the ARV is 150,000. You negociate a price with the bank for 110,000 lets say. You get a 90% loan and put 1100 down. Is it feasable to get an appraisal on the property to show its worth 125,000 and get a HELOC to help pay for repair costs? I have great credit, enough for a down payment but repair costs I might come up short. Thanks

I’m no expert, but I’ve heard that you have to own the property for a while before you can get a HELOC on it.

Something I’m planning to try with an upcoming rehab is to use my Discover card. I called Discover up a couple of weeks ago, and I was told that they will give me 0% interest for 6 months if I just ask. That should be plenty of time to do the rehab and sell the house. Plus there’s that 2% cash back bonus. It’d be nice for them to pay me to use their money…

That is a good idea. Probably the most trouble free way to finance the repairs as long as long as it’s interest free for a while.

meiguy…

Just a quick point of clarification: I’m no financial genius but if you take a 90% loan on $110K, you’re going to need $11,000 down, not $1,100…

Keith

Thanks, guess I forgot that other zero.

While Discover’s offer may sound great the real question is: What will the rate be AFTER that initial 6 month period? You never really know how long you will have a property, and if that rate is prime + 2% or whatever Discover determines the rate to be, that could have a serious impact on your monthly expenses. HELOC’s are serious business and with the feds raising rates as often as they have been you could get into some serious trouble real quick. Keep in mind that your credit scores and loan to value are what determine the rate…and of course the amount that the mortgage broker wants to make back on the deal…

I’ve used Lowes and Home Depot CC cards to finance for up to 12month interest free, BUT (and its a big but), if you do not pay at the end of 12 months you owe the deferred interest PLUS start accuring at some crazy rate like 21%. I ALWAYS pay it off as I have the resources to do so; I just like to use OPM.

DO NOT go this route if you do not have the means to pull togther the money to pay it off at the end of the period.

MEI,

If you have good credit you might be able to get a rehab loan to cover the repairs. BTW you will need an appraisal done on the house if you are getting it financed. :wink:

I have a client right now getting a rehab loan for $15k. The house is going for 134k ARV 175k. Repairs actually range around 12-13k. Total finance will be 149k.

I looked into the rehab loans but was under the impression that they wouldn’t really consider it for cosmetic repairs. Only major renovation. I could be wrong, I’ll have to check back on that. My credit and debt/income ratio is good so maybe that will work. Thanks for the info. As for the appraisal, I assume that cost may be negociated and would be done by the “approved list” of the banks.