I have the option to purchase a home for roughly $100k below appraised value and currently own a home that I am considering renting. How can I go about purchasing this new home and using some of the equity to pay down my current mortgage in order to lower the cost and enable me to break even while I rent and wait out the market?
2007-09-13 18:24:20 · 5 answers · asked by vicyankees 1 in Business & Finance ➔ Renting & Real Estate
I plan to refinance my current home but how do I go about doing the cash out at closing since I do not yet own the house - I've only heard about this as a refi and not on the initial loan. The seller already moved out of state and the home has been on the market for about a year now.
2007-09-13 18:51:26 · update #1
Appraised value means nothing.
2007-09-13 18:30:43 · answer #1 · answered by Jane 2 · 1⤊ 0⤋
You have confused the terms "market value" and "appraisal", they don't mean the same thing. An appraisal is a professional opinion, just that, It does not have anything to do with market value.
Market value is defined as follows:
The most probable price (in terms of money) which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus.
Thus, the fact that it did not sell before shows that it was priced well above market value. Since you are now buying it in an open and competitive market, you are acting prudenly and knowledgeably, and the price is not affected by undue stimulus, what you are in fact paying IS market value.
Good luck getting a lender to loan you more than that.
2007-09-13 20:04:49 · answer #2 · answered by Anonymous · 0⤊ 0⤋
Get a loan with cashout of equity at closing. As long as the home appraises high enough and you have solid credit this shouldn't be a problem. Don't forget that 75% of the rental income can be counted added to your income, increasing it enough to qualify you for the loan despite having 2 mortgage payments. Don't take out more than you absolutley need, the market is really shaky right now and will shake the economy soon. Pay off debt, hold on to equity.
Tell your lender rep what you want to do, he will know if the property will appraise out for the total you want (sale price+cash out amt) and will set up the loan accordingly. The documents will reflect the amount for the property and the amount of cash back to the seller. Different mortgage companies have different 'names' for these loan products, I can't think of any off the top of my head but they are standard faire.
2007-09-13 18:40:06 · answer #3 · answered by Morgan M 5 · 0⤊ 0⤋
Cashing out the equity is another phrase for LOAN .
Just a fancy bank term for , " give us lots of your $$$$ in the form of % " .
And , just because the appraisal says $100K under ,
Does Not mean the bank will think it is viable .
With so many lenders tanking and Countrywide sliding ,
They are super tight now on those loans .
If it was really worth ( lendable ) $100K more ,
How come they sold it to you for so little ?
>
2007-09-13 18:35:06 · answer #4 · answered by kate 7 · 0⤊ 0⤋
To change the payment on your current mortgage, you'd have to refinance. If you just paid extra onto the mortgage, it wouldn't change the payments, it would just pay it off faster.
2007-09-13 18:28:13 · answer #5 · answered by Judy 7 · 0⤊ 0⤋