Posted by Alicia - IL on March 24, 2000 at 08:26:47:
The prorated rent and deposit credit is debited
off what the borrower brings to the table at closing.
Depending on the building this can significantly offset the cash needed. For example, let’s say you’re buying a 4-unit building with rents of $600 per unit and deposits of $600 per unit. Let’s say the rent credit on is $580 per unit (prorated) or $2320 and
the deposit credit is $2400, with a total of $4720.
Let’s also say annual RE Taxes are $2000, due in arrears so there’s a credit of about $2600 for 1999 and
4 months of 2000. It’s a 5% down transaction with
a 15% seller 2nd:
$80000- Sale Price
$3000 - Closing Costs
$83000 - total due
-12,000 - seller 2nd
-2600 - RE Tax credit
- 4720 - rent/deposit credit
-64000- LOAN AMOUNT @ 80% LTV
(320) Borrower gets cash back at the table
Of course, you don’t come across this everyday, but it is feasible. It’s also possible to set it up as an
80% loan, with a 20% Seller 2nd, no money down. The credits would certainly cover the closing costs.
Does this make sense?