Market Conditions in 97217>Question Details

Lenocom, Home Buyer in 97217

I am looking at a home that costs 90,100.00. My real estate broker says I need a 401k loan to purchase this house. What do I do next?

Asked by Lenocom, 97217 Mon Jul 4, 2011

I have 20% down and am qualified for a 105,000 Loan fom a local CCU.

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8
Shane Milne’s answer
Did your real estate agent mean/say an FHA 203k loan instead of a 401k loan?

Real estate agents normally do not give advice regarding where your down payment/funds to close on the home needs to come from (which is really the only purpose a 401k loan would have in relation to buying a home), so I suspect the real estate agent was saying you needed a FHA 203k loan because the particular property you were looking at needed some repairs in order for a lender to want to lend on it.

The FHA 203k loan is a rehab loan, where the loan amount is based on the purchase price + the cost of the rehab/improvements that are to be done on the property. You can read more about it in tremendous detail at:
http://portal.hud.gov/hudportal/HUD?src=/program_offices/hou… (click on the first link called "Rehab a Home W/Hud's 203k Rehab Program" to get a very thorough overview of the loan program).

Do you think that is what your real estate agent meant/said instead of a 401k loan?
2 votes Thank Flag Link Mon Jul 4, 2011
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0 votes Thank Flag Link Sat Mar 9, 2013
Is it possible that your agent meant 203k loan? If the house needs work, this is probably what they meant. An agent shouldn't have any references to your 401k.
0 votes Thank Flag Link Fri Jan 18, 2013
Shane gave you a good evaluation of this situation. I can' imagine why a Realtor would tell you that you 'had' to borrow from your 401K under the circumstances you describe. I recommend you interview your broker again to get the exact recommendations he is making, and then meet with your lender to discuss your options for this particular property. Be sure to provide your lender the entire infomational package on the property so the lender can offer you the best advice for your situation.
Karla Divine, 503-819-6923 http://www.portlandfloatinghomeinfo.com
0 votes Thank Flag Link Fri Jun 29, 2012
Are you buying an investment (or income) property, or are you buying your next home? If the prior, then it's entirely possible that your broker could have been discussing 1 of several investing strategies that involve the use of a self-directed 401K/IRA. If otherwise, then I'd agree with the others regarding the 203K loan.
0 votes Thank Flag Link Wed Jul 13, 2011
Lenocom, I mentioned on another post the $8000 energy loan that you can bundle in to the 203K loan so you can get some extra funds that will not hurt your qualification ratios.

Tom Inglesby, Broker
RE/MAX Equity Grou503-319-9035
0 votes Thank Flag Link Wed Jul 13, 2011
I agree with the previous answers. Your agent probably said/meant a 203k loan. That's an FHA loan that covers both the purchase of the property and rehab work. So, it's appropriate if you're buying a property that needs some rehab and you want to cover both in the loan. However, in most cases you don't "need" a 203k loan; it just bundles everything together, if that's what you want.

If, on the off chance, your agent actually suggested that you tap into your 401(k) in order to buy a house, consider the possibility of finding a new agent. That'd be horrible advice in 999 cases of out 1,000.
0 votes Thank Flag Link Mon Jul 4, 2011
Don Tepper, Real Estate Pro in Fairfax, VA
MVP'08
Contact
I think Shane is correct. Most likely you need a FHA 203k Loan. These can be costly and time consuming. It depends on whether you need a FULL 203k Loan or a Streamlined 203k Loan. The difference is the amount you are borrowing to make repairs.

FHA wants to make sure they lend you money on a home that is worth lending money on-- and if it needs significant repairs, they want you to hire a contractor to make the repairs immediately so that they are loaning money on a repaired home. So, based on your loan amount of $105,000 -- and your purchase price of 90,100 -- that leaves $14,900 for repairs -- assuming the seller will also pay for your closing costs. As long as the home needs $14,900 or less for repairs you can afford the home.

The offer will be $105,000 with $14,900 to be given back to you at closin
g -- to be written as a check to your contractor -- for the repairs. This will NET THE SELLER $90,100-- their asking price.

Now, you can always offer LESS than $90,100 and your REALTOR can help you know what to offer to the seller. Every $1 can be added to the amount you use to make repairs.

I recently had a client purchase a property for about $130,000 with an additional $140,000 for repairs. His loan was for $270,000. And he was able to get an appraisal after the home repairs were finished and it was over $350,000!
0 votes Thank Flag Link Mon Jul 4, 2011
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