Newbie Needs Advice
I am thinking to purchase my mothers house for 400k that has a FMV of 550k. She had put me in charge of selling the house because i am a new Realtor but if i were to ask to buy it for myself, then i would get this amazing discount. I have a credit score of 678 and am self-employed. The house can be rented for 2200/m as a single family home or If i legally convert it to a 2-family house, i can get 2700 /m for the 2 apartment (mind it will cost 60-80k in renovation costs to do so). She will also loan me 100k after closing for either the downpayment or for rehab.
Is there a difference if i say i am getting the house for 400k and need a 300k loan with 100k down or if i say i am getting the property for 550k and my mom just gives me 250k instead still making it a 300k loan with 250k down. (note she will still be getting 300k into her hands and still technically loaning me 100k)
Is there a difference between the 2 scenarios from a mortgage point of view? I talked to a loan officer about the first scenario and he quoted me a mortgage payment of 2500k a month including my insurance and property tax. This is still too close to how much i can get for monthly rent. Would the second scenario lower my monthly mortgage payments.
i was told by a friend that if it was on record that i bought the property at 400k and decided to sell it in the future that the profit i made would be taxed whereas if i purchased the property at FMV(550k) and decided to sell later on down the line that i would pay less on the capital gains.
Any suggestions would be greatly appreciated.
having the arangement between you and your mom is not something you would want to involve your bank with. since it is a nal transaction, the bank will want verification the house is owned f/c, or a payment history showing it is not a bail out. i would suggest borrowing the lowest amount you can, to have your rent wash out your mortgage piti. then work something out with your mom on obtaining the money to convert it to a multifamily property.
The less you pay for it, the lower your property taxes will be initially. In our area, taxable value can only increase by 5% per annum and only if the assessed value is greater than taxable value.
I have been researching this quite a bit lately. There are a couple options. The first would to seek financing from the seller. In doing so, you might be able to structure a deal that allows you to make monthly payments to them on their current mortgage, thus allowing you to use the money originally planned for a down payment to make improvements. Then, upon completion of improvements to a liveable condition, you can reappraise the home and use the equity as a down payment to move into the house. Then, all improvements can be financed by yourself.
Option 2 would be to consider a 203(k) loan from the HUD program. This allows you to mortgage up to 110 or 120% of the appraised value. The catch is you must homestead this property and I am not sure how it applies to a property that is not yet "homesteadable (for lack of a better term."
Option 3 would be to put in an offer contingent on the appraisal with no EMD. You can take a shot to see what it appraises at and if it is much higher than purchase price, you can use the immediate equity as your down payment or pull out some equity for the improvements.
I have done a lot of research on this and Option 2 is the best. Option 3 rarely happens anymore due to increased scrutiny of appraisers by regulating agencies. Please le me know how it turns out!