Explain what 80% LTV means in english please - Posted by Jeff

Posted by Kim on July 17, 2002 at 12:51:43:

No, it was done during the original sale. On my contract, it was called a rehab allowance. Some call it a decorator allowance, seller consession, seller assist, whatever. Shawn Dostie gave some excellent advice on June 11th. Search 12:32:23: But the bottom line is that the seller and the buyer agree that the seller will give the buyer a certain amount of money at closing. Check with your mortgage company. It’s all in the WAY the contract is written.

Explain what 80% LTV means in english please - Posted by Jeff

Posted by Jeff on July 16, 2002 at 11:35:12:

When getting financing on a 35,000 dollar house (this is what the payoff is), but the house will appraise for atleast 55,000. I want to buy this house for 35,000 and then take the equity (about 20,000) and pay off high intrest credit cards. There is currently a tenant in the house paying 500.00 in rent. Can someone please give me ideas about how to finance?

Jeff

Re: Explain what 80% LTV means in english please - Posted by Kim

Posted by Kim on July 16, 2002 at 17:29:19:

Gee, I had almost the exact situation, numbers, etc. a couple of years ago. The contract stated that my mom was selling me the house for 50,000, and that there was a 12,000 rehab allowance. She owed 38,000 on the mortgage. I borrowed 5,000 for the down payment and closing costs. At closing, I gave the title company a cashier’s check for the 5,000, and they gave me a check for 12,000. Out of this check, I repaid the 5,000 used for the D/P and C/C, did some rehab, and used the rest to pay off some bills.

Now I’m not sure if it could work that way with your mortgage company, but I’m learning that EVERYONE’S rules are different!

Re: Explain what 80% LTV means in english please - Posted by Walt

Posted by Walt on July 16, 2002 at 12:25:19:

As you probably know, LTV means loan to value. That being said, lenders use the lessor of purchase price or appraised value as the basis to calculate LTV. In your case it is the purchase price. Ed commented in a post late yesturday or early today (just a few back if you want to look it up) that lenders don’t consider the equity you want to borrow against to be yours. They feel that you don’t have anything to lose, that you earned, therefore you are a greater risk to default. A year from now, after you have made payments with your hard earned money, you are more likely to make payments on a cash out of the equity since you have your money in to it. The other problem that you have, is that there are few lenders that loan on such low amounts. Your local bank is probably your best bet. Sorry for the bad news. Good Luck.

Re: Explain what 80% LTV means in english please - Posted by brad

Posted by brad on July 16, 2002 at 12:20:51:

LTV= loan to value. the market value when you first get a morgage is what you pay for the home. if it were more the seller would have taken a better offer right? so 80% loan to value on a 35000 home is 28000 so in the eyes of the lender you are responsable for coming up with the rest of the money (7k) this is why seasoning is such an issue right now. the bank will not recognize your equity because you have not earned it. there are programs that you can get the money out with but you will pay for it. home improvement loan. w.l.o.c. hard money,ect. until you have owned the home a while you will not find many lenders willing to give you much credit for the equity. lenders want to see that you have something to loose. one option is to have the owner refinance and then buy it subject 2 and split the difference. although i know this is done i am not sure of the legality of it or how to put it togather. as for the working line of credit i missed the seminar in atlanta so i am out of the loop on that one too.

Re: Explain what 80% LTV means in english please - Posted by Jeff

Posted by Jeff on July 16, 2002 at 19:52:26:

Kim, first, thank you for sharing your experience with me. So, let me get this right. Your mom sold you the house for 50K with a 12K rehab allowance included? Is there anymore you can tell me? This is exactly what I want to do. But, some say I’ll have to wait a year before I can take a home equity loan out in order to get the 15k to 20k out of the house. Again, thank for your story.

Re: Explain what 80% LTV means in english please - Posted by Jeff

Posted by Jeff on July 16, 2002 at 16:06:36:

Walt and Brad,

Thank you both for your knowledge. You have made it much easier for me to understand. Let me ask this. Should I have the buyer refinance the house and split the equity in it with me? The owner is my mom and she just doesn’t want to deal with the house anymore because she lives out of state. Anymore help would be appreciated. Jeff