Can I use equity of the home I'm about to buy as a down payment if it appraises higher than the purchase price

Question

For example: purchase price is $165,000. appraised at $175,000.
can i use $5,000 of this equity for a down payment? Having this $5,000 down will give me the 3% down i need for a much better interest rate. Is this possible?

Answer 1

No, the "equity" in the home isn't yours until you actually own the home. Since the equity isn't your's yet, you can't use it as a down payment. Besides, where would you get the money for the equity from? From your lender? That would mean that your loan would be $5,000 higher, not lower. From the current homeowner? That would mean you would need to have the seller do a seller financed mortgage, which means that the seller would hold a lien on the house as a second mortgage for the amount. That would still mean that your loan(s) in total would be higher.

Answer 2

First, the numbers don't add up... 80 percent of the appraised value is $460K...if you put 10% down on $500K, that brings the loan value down to $450K, beneath the 80% mark. So, the first question is, who did the appraisal for $575K..was this a realtor/agent or the bank's appraiser? If it was an agent, the appraisal has no value except as a general gauge of the market at the time the agent inspected it, in which case, everything will hinge on the true appraisal. If it was the bank's appraiser, you really should be home free - put down the 10% of the selling price, tell the bank no PMI and then decide how much of the remaining 10% you have set aside you can use for repairs (or take out a home equity LOC). Don't bank on increasing values - we may still have another 12 months of softening real estate markets.

Answer 3

No. The loan amount is based on "the lower of the purchase price or the appraised value". If the lender agreed to lend you 97% of the home, that will be 97% of the $165,000.

Answer 4

I don't think so. The appraisal is just a opinion as to the fair market value of a property. The diffence between the appraised value and the purchase price does not confer any money value to you unless you happened to sell the property at the appraised value.

Answer 5

No.

Also be aware that you shouldn't be buying a home if you dont have at least 5% down payment (and better would be 10% to 20%). You should also have savings to cover 6 months of house payment, in case you get into an emergency (some fool hits you and you cant work, etc.).

Buying with no money in savings is a mistake.

Answer 6

no
usually you can only borrow so much percentage of the appraisal price

Answer 7

uh, no