Thanks for the reply Mr. Bronchick…as an investor I read and post here on a regular basis. All the new regulations regarding “flipping” and FHA is not all the fault of unscrupulous investors, as the question confirms. There are many mortgage brokers who suggest to their clients to lie in some way or another so that the deal can fly!
To all new investors…if you are not sure of a loan scenario then please ask here or on the other sites BEFORE you sign anything. Once you sign, and you do something illegal even if it was suggested by a “broker” you are still liable! My 2 cents.
I was speaking with a mortgage broker the other day that ran the idea of a silent 2nd by me, but i did not fully grasp the idea…something along the lines of finding a house (ex) listed at 100,000 and ARV 130,000–to come up with no cash at closing since lender will only lend 80% of purchase price, raise the purchse price to the 130,000 and have seller carry back 10% (this is where im confused). Once you change the purchase price to 130,000 how are you getting any money back…he explained it that at closing you pay off the 10% the seller held, and walk away with money for the rehab (sorry if i did not explain this well…)
Any help or thoughts on this is greatly appreciated
What your mortgage broker is suggesting is that you LIE to the lender, pass money under the table and come out with nothing down. That’s loan fraud.
Instead, find a commercial or hard money lender that will give a loan based on after-repaired FMV and escrow money for repairs. The interest rate may be higher, but you shouldn’t care if you intend to resell the property in a few months.