Down Payment Issues -Zero Down Program Needed
Can my client provide a promissory note for a down payment? He is buying the property for 1 million appraised for 1.9 and 1.8.
I need to show he has provided a down payment on the Purchase Agreement.
The Purchase agreement will reflect 1.2 million -purchase price showing a 20% down payment so he can get the funding he needs from his lender. He is trying to do zero down with possible cash back as his loan amount is 1.5 to be used for repairs and will be outlined for the lender.
Please provide your suggestions to create a zero down purchase that is easy and works.
I have spoken to my lawyer and he has said the exact same thing, how can i make this a legal zero down deal for my client?
I do not know about 0 down, but many investors will donate money to a non-profit organization that helps homeowners. The money is then gifted to the buyer. It all happens at closing, is shown on the HUD. Obviously the non-profit does charge the buyer a fee.
While this is obviously a gray area - it is not illegal. Looks for an investor friendly mortgage broker.
a little confused,
the buyer is purchasing a house worth 1.8m, but cannot come up with 20% down. are you kidding. as an investor, why not take the appraisal to the lender , get an investor loan at 70% (1.2m) and the deal is done, the lender is secure and you can pocket the 200k.
any thoughts.
[addsig]
Quote:
On 2007-01-22 16:10, bgrossnickle wrote:
I do not know about 0 down, but many investors will donate money to a non-profit organization that helps homeowners. The money is then gifted to the buyer. It all happens at closing, is shown on the HUD. Obviously the non-profit does charge the buyer a fee.
While this is obviously a gray area - it is not illegal. Looks for an investor friendly mortgage broker.
The IRS has been scrutinizing these "charities" because many are basically not qualified charitable organizations. If you go down this road, make sure to see their non-profit status letter from the IRS (perhaps you can find that on the IRS website) and that you run it by an attorney.
The IRS basically collapses the bad deals and the people running these are being prosecuted.
It’s still a non-disclosed agreement between the buyer and seller, and would constitute loan fraud.
But even if it weren’t fraudulent, it would be highly risky for the seller. Not to mention the added tax liability to seller, for funds he actually never receives.
What about using a HML?
Being that you guys have some savings you might consider the buy it, fix it, and flip it method first.
There are a number of ways to locate properties without using an agency. Properties on the MLS listing come with commission fees.
I would try to locate a wholesaler in your area. Do not use their numbers on repair costs and after repair value. Do your own research. CMA information can be gathered at the county clerk in their records department.
Get a licensed contractor to write up a worksheet. It will cost you a $100-200. Then sub-contract all the individual jobs and save a lot. Do as much of the work yourself that you can.
Use this formula:
MO = (ARV * .7) - Repairs
where:
MO = Maximum Offer
ARV = After Repair Value
ie.:
($150,000 * .7) - $20,000 = $85,000
This states that to receive a 30% ROI (return on money), you cannot pay more than $85,000.
You have to figure that your costs will be approximately 12-14% of ARV. Those costs include holding and closing.
30% - 12% = 18% ROI or $27,000
Use this as as a guideline. You should know what your profit is when you buy the house. You make the money when you buy and gradually lose it until it sells. Good luck![ Edited by frequencyjones on Date 04/13/2007 ]
Great deals are easy to find in some areas, and almost impossible to recognize in others.
Where are you located?
Chris