I hear that you can purchase a home for say $100,000, but it is valued at $150,000. buy the house with no money down and a low interest rate, take out some of the equity after close, use that equity to pay the mortgage for a year, re-fi after six months and then put the house up for sale. can this be done? is it legal for the person buying the home? or is it a scam?
2007-01-22 10:08:51 · 6 answers · asked by godcomplex13 1 in Business & Finance ➔ Renting & Real Estate
Yes it can be done. But you cannot prepay the mortgage note for six months. The lender will just apply the over payment to the principal. Who will in their right mind will sell you a home 50K under fair market any way. Have an independent appraisal run on your own to make sure the seller is not scamming you.
2007-01-22 10:14:52 · answer #1 · answered by golferwhoworks 7 · 0⤊ 0⤋
It's possible, but here's the thing: most investors (lenders) will not allow the value of the home to be used in the equation for the first 12 months; they will only use the purchase price. So, in their eyes, you owe 100% of the value (purchase price). There are a handful of investors out there that will lend you up to 80% of the value immediately after you purchase a home, but you will normally pay a much higher rate for the new loan, and you would probably only net $15k after closing costs.
If you can purchase a home for $100k and it's worth $150k, then purchase the home and turn around and sell it - that's the best way to make the money quickly.
2007-01-22 10:19:11 · answer #2 · answered by Mr. Knowitall 3 · 0⤊ 0⤋
This is a great way to get burned. There are people out there doing one million and one things and only 1/10 of the million things make any sense at all.
Hypothetically this would work. But one unforseen and the whole thing comes falling down around you.
If you would take off swimming to a distant island and you are confident that you would make it no problem. Go for it. But don't cry when you're out there too far to get back and it's dark and cold and there is no way to be saved. You will only have yourself to blame.
2007-01-22 10:16:37 · answer #3 · answered by Anonymous · 0⤊ 0⤋
If a bank allows you to do this and you do not have penalties on the loan. Also it depends on the loan you get. Some loans do not allow you to pull money out , some do. Also you want to assure that this house is not decreasing in price because when you plan on selling it you want to profit at least 20% in order to cover loan fees , penalties, possible renovations before selling it. Good luck!
2007-01-22 10:15:21 · answer #4 · answered by BrownBagFormal 2 · 0⤊ 0⤋
Why might he ought to pay off his loan(s) in the previous the ultimate? as long as all his mortgages are satisfied at ultimate, i actually do no longer see what the situation is. and that i do no longer see how his loan(s) influence your ability to be conscious and qualify for a loan. I particularly have achieved many closings the place the seller had to convey money to the table simply by fact the payoffs and seller fees handed the acquisition fee.
2016-12-12 17:56:14 · answer #5 · answered by amass 4 · 0⤊ 0⤋
Yes it is aboslutely legal.
2007-01-22 10:18:54 · answer #6 · answered by Anonymous · 0⤊ 0⤋