Cash Out Deal! Need Help!
We can get a loan for $130,000 to purchase a home. The seller is asking $89,000. At closing, how can I receive a check for the remaining $41,000. Can the title company do a third party disbursement for the extra $41,000? Can we state where we want the money to go on the escrow disbursement sheet?
Can someone help direct me with this process? I am willing to pay a couple of grand (2K) for your services at closing.
I have a little knowedge in creative mortgages...but I know that it is illegal to do what you want to do.
What you CAN do is find out what other homes in the area are selling for and see what the difference is. You have to buy the home and then either sell it for higher or refinance, but obviously you need to walk into equity. Purchase loans are almost always only for the amount of the contract price, not the assessed or appraised value.
A lot of assumptions. Let's look at this: You purchase the house for $89,000, plus closing costs (3.5%) = cost is $92155.00. Most banks will not loan out 100% of the value - risks are to high. You never said that the house was WORTH $130,000. If the home is worth $130,000 that different. Conventional lenders require 20% equity to protect their interest or you need to purchase Private Mortgage Insurance (PMI). I believe you're trying to extract $41,000 without having the equity to secure the mortgage. This is fraud and is illegal. What is you goal? Buy a home? Make money on a transaction? If there is $41,000 of equity, the Escrow company will disburse the funds to you or whomever - that's what you paid for their services for. Is there some other issues here?
WLeeSuccess,
You did not offer enough details for people to figure this out.
It sounds and smells like a fraud situation given the little you said.
Lenders want to lend on property and they want to be prudent. Just because you qualify for 130K does not mean the lender will give you the cash when the security is worth a whole lot less.
Lenders prefer to be no higher then 80%. Once over 80% they start looking for other signs that they are not making a bad loan.
If you fiddle the numbers to get the loan you are talking fraud and that can mean jail time rather then just a fine.
If the deal at 89K is a good one do the deal and then make your money when you sell or what ever.
John
[addsig]
If this property appraises for $130,000. there are ways that you can legally do what your trying to do. Not all title companys will be willing to help with this but if you look I'm sure you'll find one that does. Look for one that deals with investors that will understand what your trying to accomplish. Our attorney, realtor and title co all make this work for us. You don't need all the answers, just know where to find them. Good Luck
You say that you can get a loan for $130. That means that the Bank will approve you for upto $130, but subject to the purchase or appraised value with the appropriate down payment, which may even be 0% down.
The fact that you are probably approved for a higher loan amount than what the "subject" property is selling for, does not mean that the bank will issue the full $130K at closing.
Now, if the property is worth more than the $89K, you might be able to get a Line of credit at closing. Not the easiest loan to get down on a purchase. Make sure you get it approved before you close the deal. This is about the only way you can get that extra money out of the deal.
Don't try to play any games with the sales price and have the seller give you back money at closing, this is grounds for Fraud and you will surely regret it if you are caught. I know too many people in "Club Fed" which is Federal prison.
Good luck.
If the house is worth $130,000.00. Get a loan with a bank that allows unlimited seller credits and bridge loans. That is the only legal answer to your question. The interest rate is higher, but it is legal.
Lori
[addsig]
What you are trying to do is only illegal if you work outside the confines of the law.
If the property will appraise for 130 then you have a contract for the 130k. Have your attorney attach a rider on your contract that states 1. the purchase price of %89k 2. the seller dispurses funds for the balance in the form of repair credits. This covers you legally. To make things easier on your seller you may want to offer to pay the difference of the transfer tax between the 89k and the 130. Not much to pay to walk away LEGALLY with cash in hand.