real estate question?

Question

i was always wondering when people say they do no money down deals and walk away from the closing table with cash in their pockets. how do u walk away with a check from a no money down real estate deal?

Answer 1

One way of doing this is by having a seller's concession and/or a HELOC at closing.

Answer 2

You borrow more money than the cost of the home. Some lenders will lend up to 125% of a homes value. (These loans are not legal in all states.)

You might some cash in hand, but the loans are a TERRIBLE deal. Market for 'A' paper is around 6% - 6.5% right now, depending upon the point spread. A 125% cash-out may be as high as 8.5% for 'A' paper. With the extra money borrowed and the higher interest rate, your payments are nearly double what they would have been on a typical 90% loan.

The only time that they're a good deal is if you are buying the property for well below its appraised value and are planning on "flipping" the property. You use the extra loan proceeds to fix up the property and re-sell it. The real estate market is starting to flatten out in some parts of the country -- the West Coast and Northeast in particular -- which may leave you holding the bag if prices start to slide before you can flip the property.

Answer 3

The property has to have EQUITY in order to put no money down.

Let's say for example someone is selling a home for $100,000 but it is worth $120,000 so there is $20,000 worth of equity in that home which is plenty to wrap your closing costs or down payment or both in if you need to. So lets say your loan officer says you need 5% to put down on the home which in this example is $5,000 and you don't have $5,000. You can tell the seller to wrap your downpayment of $5,000 into the price of the home so now the sales prices is $105,000 instead of the inital $100,000. It works because now you have $15,000 worth of equity left in the property. Now you see how the no money down works, right?

Now the cash out comes in like this...lets say that same property needed $10,000 worth of repairs done to it and you didn't have the money. You would get a repair guy to give you an estimate with the prices on it so you can give it to the seller and the seller can either cut back a check to you or the repair company out of the leftover equity for $10,000 to get the home repaired.