There are a whole lot of other things to discuss to do this right, and I would be happy to walk you through it. PLease call me or email me at your earliest convenience if you would like my guidance.
Co-Owner / Licensed Mortgage Broker
Primary Mortgage Group
http://www.linkedin.com/in/ryanmcpartland <-- more about my background
Some lenders started programs wherein they could lend you the money as a short-term loan and collect it after you file your tax returns and get the credit from the government. A few states have enacted similar programs to lend you the money on a short-term loan in the same fashion.
Can you borrow more money than the home is worth? Not likely these days. You can, however, borrow using repair escrows, for example 203(k) under FHA or HomePath Renovation in conventional. Loans of this type set aside monies for repairs, especially large jobs to remodel, for example. The lender will send an appraiser to give a contingent valuation based on the remodeled home, plus the current value.
Many lenders were making loans of this type, but they are not much in favor now. The problem is the lender wants to make sure the remodeling is completed in a timely fashion and so provides an inspection several weeks after closing to verify that and authorize payments out of the escrow account.
203(k) actually allows up to $35,000 for such repairs, but finding a lender who'll do it is somewhat difficult.
There were a couple of good answers below by real estate agents. If you want some definitive answers that go outside the scope of the comments I provide you below, please contact me directly. I have been a mortgage broker for 10 years and have seen and heard most questions and been able to provide asnsers with supporting documentation on 99% of them.
First off, as Mark had mentioned below, the $8000 tax credit application to down payments never happened. There was a lot of talk abou this happening, but it never came to fruition, because by the time the government decided to allow for this, the companies who were planning on participating felt that there wasn't enough time left (the tax credit was going to expire at the end of November) to spend the money to set up their tax credit programs. They figured that once they had the all of the financing options in place, and incurred both advertisement and overhead costs for support teams, then it would be too late. Fortunately for us (depending on how you look at it...) the government decided to extend the tax credit through the end of April. No one, as far as I know (and we have done extensive research on this), has gotten on board with the tax credit "fronting".
Second part of your question... Shortsales. As any of the agents below will attest to, short sales can be a long, drawn out process. With the number of shortsales and foreclosures at their peak still, everyone wants a good deal. I don't blame anyone for looking for a good deal, but you need to understand the process. We have mortgages in underwriting at all times that are short sales, so I can tell you this with confidence. You need to be prepared for bumps inthe road. We have one now that the MLS lisitng reads "bank approved short sale priced at pre-approved $79,000". Now the problem here is, you are not going to offer full price, so the deal has to be signed off by not only the borrower, who at this point doesn't care what the house sells for, but more importantly, the exisiting lender, becasue you are making an offer for less than what the "approved price" was. This basically starts the process over (the initial process for the homeowner to get to the "approved price" with the lender could have taken 6 months to get there). This usually has a a time fram of 20 - 45 days, if you are dealing with a decent negotiator, but could take up to 90 days. Here's where the next problem comes in, on the financing side, we would need to do a pre-qual before you were able to put an offer in. The prequal would be attached to the signed contract. We wouldn't know when we going to get bank approval, so we would have pulled your credit (which is good for 120 days with most lenders, which is good....but they could decide to repull before closing, so you run the risk of thinking you are approved at the beginning and then a collection pops up that you didn't know about and at the last minute you get denied. We would have to get an appraisal done, which is the biggest problem, becasue you would be paying for an appraisal on a house that you don't even know if the deal is going through AND is only good for 60 -90 days because the comparable home "comps" used to derive the value would be outdated by then and you might need to pay for a second appraisal. We would also need to be upadating all other docs each month you wait, such as pay stubs and bank statements (if you happened to accidentially overdraft your checking account...we have a problem). Lastly, I would tell you what the rate is today, and the rate could be different by the time we closed (we could use longer rate lock periods, but the rates get higher as the number of lock days gets longer, becasue the bank incurs risk to have to honor the original rate even if they go up...but at the same time...we still don't know how long the rate needs to be locked for becasue we don't know how long the process with the bank will take). If the rate had to go up in the end, your debt ratio could blow up becasue the payment could go up enoough to now casue a loan denial.
Having heard all of my rant, you can see that these short sales are typically a real nightmare for everyone involved. If you have your heart set on one of these, you should consider offering full asking price, because the price is already lower than the surrounding homes...the bank wants to unload the home. This gives you the chance to expedite the process, with no further negotiations.
Third part...can you take a loan for more than the purchase price is. Diane below touched on the FHA 203(k) loan, which might be a viable option, if you are planning on doing repairs. With this, you would need to have a contractor come in and give you estimates as to what the costs would be to get the house up to par and then have an appraiser come in and evaluate what the "future value" or "work completed" value would be. These always sound like a good idea..con't...
Realtor, FORTUNE International Realty
Cell 954 643 1050
Phone 954 727 9347 Ext 258
Fax 954 727 9348
The best person to advise you is a Realtor. Do you have a Realtor representing you in this purchase?
In most cases the seller pays the commission fee, so there should be no cost for you.
A couple of things to ask your Realtor:
1.. Although the asking price is $115,000, what is the fair market value (FMV - based on comparable sales)?
2. Ask your Realtor to call the listing agent and find out where the seller is in the short sale process. Short sales tend to be complicated and lengthy, so you do not want to get wrapped up in a transaction that ends up going nowhere.
3. Ask your Realtor to show you all of the properties on the market that are roughly comparable. Are you sure that this property is the best one on which to write an offer?
Also, if you are looking to avoid coming out of pocket for closing costs, you could increase the offer amount, and have the seller pay all closing costs.
As Mark said, the gov't said that the $8,000 credit would be allowed to apply towards the closing costs, but in reality, that never happened.
Good luck with your purchase.
Mark makes some good points below. I will add that one of the few ways I know to get extra money towards repairs is the FHA 203k Streamline loan. It lets you take between $5,000 and $35,000 above the purchase price of a house to make improvements. You must still come up with a downpayment, and the first $5,000 in money must go to repairs, not cosmetic items. The house must appraise for at least the purchase price plus the extra money you will be getting back. And they won't just give you cash - you need to work with a general contractor or other expert who will receive checks directly. A mortgage broker who handles these loans will be able to give you more specifics.
Mark is also correct that you should have a Realtor representing you, especially as a first time home buyer. You need to protect yourself and your money when writing the contract and going through the multitude of other steps needed throughout the transaction.
I am a Realtor working and living in Hollywood. If I can help guide you further please let me know. Thank you!
Congratulations on picking your first home. Let's see if we can help you get it.
1) No, unfortunately the Florida program to front buyer's the $8,000 tax credit never happened. Another of Gov. Crist's empty promises. You'll get the money when you file your federal tax return. If you qualify for an FHA loan, then you will have to come up with 3.5% as the down payment. If not, it will be 20%.
2) Have you talked to a realtor about the value of Comperable Properties yet? That is the best way to determine how much to offer and to make sure that you do not pay too much. It could be thay $108 and $115 are both way too much.
3) Unless the property needs substantial repairs, no, you may not borrow more than the purchase price in today's market. And if a lot of repairs are needed, then it will be harder to get the loan.
Get yourself your own realtor for this transaction. It won't cost much, if anything at all.
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