Posted by Dave Mckee on February 27, 2001 at 21:05:01:
Tommy,
Banks are by nature very conservative. It’s not their money they are lending out.They also have a ton of government rules and regulations to comply with that private lenders do not have. Mortgage brokers are lending individual or institutional lenders money and those people have the final say in who gets the loan. Thus, they are much more flexible. They are more likely to loan a pecentage of the apraised value rather than of the selling price, depending on the strength of the borrower.
Hope that clears it up a little.
I’ve was told that banks won’t do it, a friend who has takin course says you can BUT ONLY IF THE SELLER of the property says yes. THAT SEEM TO BE THE BIGGEST MYSTERY. I live here in LOS ANGELES. SO is money back do at signing possible, and how, and why does my real estate friend say NO.
Cash back at closing is possible but probably not through a bank. We have been using the Carleton Sheets program for about a year but didn’t start buying until about November. We have bought six buildings and taken cash out of all of them.
Buildings appraised higher than the selling price so we wrote the contract for the higher price. We then had a credit in the addendum for the difference from the higher price and the actual price. The credit was for repairs. Hope this helps,and YES it can be done.
By the way we work through a mortgage broker. Just make sure your cash flow can still cover the higher financed amount and weigh out the benefit of cash up front or better monthly cash flow.
I bought a house 30k below market for cash. Went to get a mort. The bank would only loan me what I had paid for it. Could not pull out any cash. They did not care that the comps said it was worth more. So I say FALSE!!!
I’m a mortgage broker. Have been for 20 years. I’d love to tell you that we have lenders who will base your loan amount on the higher of the sales price or appraised value, and let you put money in your pocket at closing, but it’s just not so.
Also, what is described above, as having an addendum to the contract with a “credit for repairs” is very very possibly a violation of the terms of the mortgage, if the seller “credited” any cash back to the buyer after closing. Which is just a nice way of saying the seller gave money to the buyer after the closing.
I hope your mortgage broker knew about this arrangement, and included a copy of this “addendum” to the lender when submitting for loan approval.
If the mortgage broker withheld this info from the lender, then the mortgage broker isn’t doing the buyer any favors and in fact is helping the buyer commit fraud.
If I have misread the terms of the deal, please enlighten me, and I’ll change my opinion accordingly.
Long story short, traditional financing isn’t the way to go if you want cash back up front.
The post that mentions keeping the property for a year, then refinancing, assuming a higher value, is accurate. It is possible to pull cash out under this sceneriaro, if the property has appreciated in value, or if you got a great deal on the front end.
Re: CASH BACK AT CLOSING-TRUE or FALSE - Posted by George
Posted by George on February 28, 2001 at 24:59:22:
Instead saying it is false, look a little closer to what you did: you went to a bank!!! check back your course, you will see how you could get some cash at closing…
I think cash at close also means when you refinance a property. You may be “stuck” with a lower mortgage on an undervalued property for six to twelve months, but could then go to another lender, refi at the appraised value, and pull out cash then. You enjoyed positive cash flow for the six months because of the lower price/mortgage, but then give up the cash flow for substantial greenbacks in your pocket when you refi. I did that, bought under market, then waited one year to refi at a much higher mortgage, pulling out nearly 10k cash.