If I Were To Find A Great Deal On A Preforclosure Could I...
I'm a newbie and am interested in preforeclosures, foreclosures, and REO's. I have very little capital, but some equity in my current home. Can I use my equity in my current house or my 401k as collateral to the lender on a 100% investment loan? Can some lenders finance inv. property 100% including prepaids ((zero out of pocket?) This is risky, but if the right deal came along? We also have a rollover IRA with about 10K in it. Our income could cover another mortgage without putting us in jeopardy. I'm just anxious to get started...been reading for several months.
With solid income and decent credit, you might be able to find a lender who'll loan 100%, esp. if you sound like you know what you're talking about. Visit some private lenders and make your case. I wouldn't make the criterion 'zero out of pocket,' though, since there are always going to be some incidental expenses before, during, and after your purchase. More likely this would be a private lender or mortgage company on somewhat less favourable terms than, say, a bank or credit union. But the latter may require you to put 20% down--no matter what the appraisal--which is a drawback; at least that's the best deal I've gotten from Wells Fargo with my 'stated income' docs and my near-800 credit scores.
Depending on your equity, you can also arrange a HELOC account to get the capital; then you can basically write a check on the account and they don't care--formally, anyway--if you take it to Vegas and squander it on craps. Might be your best bet to get started.
In your situation, if let's say you find a "great" deal, instead of taking equity of your current house and trying to get 100% loan, I would suggest finding an investor that has a lot of cash and getting them to put up the money, for percentage of the equity. Let's say they put up the money and take 50% and you do all work and take 50%.
Because you are an investor the loan that you are going to get with most banks will 90-95% of the sale price… So you will need to talk to your lender and the seller where the seller his or her price and you get what you want… Let say the seller is asking $100,000 and the worth 127,000… 10% of that $100,000 will be $10,000… Your lender or you talk to the seller on paper at look like you pay $90,000 but the seller still get his $100.000… Get the Idea? Good luck… 8-)