Can one take out a first time mortgage that is greater than the cost of the house and use the excess money to pay off other debt?

Asked by Trulia Chicago, Chicago, IL Tue Feb 12, 2013

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Joanna Weiss’ answer
Joanna Weiss, , Chicago, IL
Wed Feb 20, 2013
Usually you are able to finance a home with a 5% or 3.5% down payment. I dont know of any lender that will allow you to take out a greater mortgage than the property to pay down debt. There are 203K loans that are designed to be more than the home value, but the proceeds are used to fix up the property.
1 vote
Jeff Nobleza, Agent, Chicago, IL
Tue Feb 12, 2013
If your home is worth more than the initial cost then generally yes. Call Bernard Duganzik at 847 491 1855 with Baird & Warner Financial and he can give you some insight
1 vote
Sandro Gonza…, Agent, Oak Brook Terrace, IL
Tue Mar 26, 2013
No, unfortunately first time mortgage loans of this type are not made… In the past, 6 years ago, lenders were tricked by unethical mortgage brokers who found a way to give buyers money back at closing. This caused mortgages to be taken on for amounts the home was not worth.

However, there does exist a 203K Loan product which gives the buyer money to repair the home after the lender approves of the repairs..
0 votes
Joe Schiller, Agent, Chicago, IL
Tue Feb 26, 2013
everything is available if your willing to pay for it
0 votes
Manuel Brown, Agent, Chicago, IL
Tue Feb 12, 2013
Trulia Chicago,

The state of Illinois along with our fair city of Chicago were among the highest in fraudulent loans processed during the the big real estate boom that was artificially inflated by greed from the mortgage industry and everyone in real estate that turned a blind eye. Mortgage principals that had never failed the housing and banking industry were tossed aside in order to line the pockets of unscrupulous professionals from bond rating institutions, mortgage insuring contracts, appraisers, mortgage brokers, real estate agents, and some buyers that were doing nothing more than buying as many properties as they could and cashing ot at the end of every purchase knowing good and well they could not afford those loans.

That being said the rules that had applied to loans and were in place to protect the public and lending institutions before the collapse are now back in place so in no way shape or form can a federally backed mortgage be greater the value of the house in order to pay off other debt. In a nut shell that was a bad and corrupt way of home buying that should have never occurred.

As a further consequence of those bad lending practices during the boom we may find those who can only afford to purchase housing in the 50K to 100K range unable to obtain financing. This was the mortgage loan amounts that had the highest predatory loans during the boom. As the rules have know become stiffer and cost to originate loans has increased, and the new fines that will be enacted for any errors on the HUD, lending institutions are trying eliminate what they consider non-profitable loans. As an advocate for housing available for all that work hard and qualify I hope lenders are prevented from eliminating loans 50k to 100K. When the spoke about this in 2013 Economic Outlook held by the Chicago Association of Realtors I was highly disturb by this topic. I myself come from a family that started in a home that in this type of policy goes forward my mother would not have been able to buy her first home. Hard working people should not be punished for the errors of the greedy few. As you can see this is something I am very passionate about.
0 votes
Cindy Wilson, Agent, Chicago, IL
Tue Feb 12, 2013
Yikes...this isn't a helpful inquiry or suggestion to be posting, Trulia. The government would consider that mortgage fraud. That's partially to blame for the mortgage/market mess we've been in for the past few years. I'd remove this question.
0 votes
Matt Laricy, Agent, Chicago, IL
Tue Feb 12, 2013
No you cannot do this at all.
0 votes
Bill J Delig…, Agent, Naperville, IL
Tue Feb 12, 2013
This would require some non traditional financing that not even your friends and family network would except.
0 votes
BJ Tregoning, Agent, Chicago, IL
Tue Feb 12, 2013
Not unless you have a time machine and can go back to 2006
0 votes
Thats what we are missing, time machines....
Flag Tue Feb 12, 2013
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