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Delayed Financing

Home Mortgages and Home Buying Delayed Financing

  •  Al3x 
    Participant
    Status: Resident
    Posts: 6
    Joined: 04/15/2017
    WCICon18

    Hey guys, I am trying to buy a home and I would like to use my parents cash to my advantage to get a good deal.

    Essentially I pay the property using money they give me (not a problem for them at all), then I get a home equity type of loan and pay them back.  I would only pull out 70% of the equity as I was planning on doing 30% down payment anyways.  I have excellent credit, no other debt, and my debt to income ratio would be acceptable.

    The reason for this type of transition is, I think I can get a better purchase price (30K less).  I of course plan to take all the necessary precautions including getting thorough inspections as well as an appraisal (so I don’t get blind sided when the bank comes up with a different value).

    I have a place in mind and believe I am getting a below market value deal already, I just wanted to know what are the cons of going this route assuming I can get a better purchase price (which means lower mortgage and a lower property tax).

    What do you guys think?  Is this feasible or am I just better off going the traditional route even if it means a higher asking price.  I did some research and it seems feasible but the fees associated with this type of loan seem to be higher, but still advantageous in the long run.

    Thank you

    Alex

    #171747 Reply
     Tim 
    Participant
    Status: Accountant
    Posts: 600
    Joined: 09/18/2018

    “the fees associated with this type of loan seem to be higher, but still advantageous in the long run.”

    Heloc should have much less fees, normally it is variable rate, 10 years. You can pay cash for the house and get it done. You can pay cash for the house and get a conventional fixed rate mortgage as well.

    Purchase is one decision and financings is another.
    You can get prequalified as well.
    Do you have the down payment and qualify?
    Fixed/variable, term and rate. Has fast are you going to pay it? For sure, don’t do a variable for more than 5 years.

    There is nothing wrong with parents helping from a liquidity standpoint. What happens if a hiccup occurs?
    Prequalified leaves your piece done. The bank may want a specific appraiser or inspector as well. It maybe a very expensive $30k savings. Why would you not require the same for a cash deal? Is your thought your cash is better than a bank? Same title company as well. Missing why you want to put your parents liquidity at risk.

    Inspection, appraisal, title search and financing are the required elements . Back to back closings do happen.

    #171752 Reply
     ajm184 
    Participant
    Status: Other Professional
    Posts: 473
    Joined: 07/14/2017
    The reason for this type of transition is, I think I can get a better purchase price (30K less).

    Click to expand…

    What is your thought basis of this purchase price discount?  A reason I could see the approach as being viable is a sub-10 day purchase contract close without appraisal/inspection.

    Are you looking to re-allocate your cash to other ‘investments’ instead of the home downpayment?

    It appears you are making financing part of this transaction too complicated.  You have 30% down, you have the credit to finance the purchase.  Between the two you should be able to obtain a very competitive interest rate and the loan tenor that best suits your need(s).

    #171778 Reply
    Liked by ITEngineer, Zaphod
    Zaphod Zaphod 
    Participant
    Status: Physician, Small Business Owner
    Posts: 4782
    Joined: 01/12/2016

    I guess I just dont understand how your financing model has anything to do with the purchase price.

    #171800 Reply
    Liked by q-school, Tim
    Drop it into MD Drop it into MD 
    Participant
    Status: Physician
    Posts: 238
    Joined: 09/20/2018

    The banks move faster now then they used too.  Unless there is a concern that the bank will not approve a mortgage then there is little reason to get a better deal by paying with cash.

    Also that is a lot of money to barrow even from parents.  I am not sure but wouldn’t there be tax issues with that?

    #171839 Reply
    SerrateAndDominate SerrateAndDominate 
    Participant
    Status: Physician
    Posts: 222
    Joined: 02/01/2018

    OP, have you sold your first house you previously asked about?

    Earn everything.

    #171852 Reply
     Al3x 
    Participant
    Status: Resident
    Posts: 6
    Joined: 04/15/2017

    Sold the first house.

    The reason being is that I can move faster with the deal and the seller gets a sense of security (not worrying about the deal falling through with the loan).

    I am already preapproved and can get a loan no problem, I am just trying to get a better deal by offering cash.  The bank is fine financing the house after it’s sold and my parents get their money back within a short time.

    I am essentially getting a mortgage on the house after it’s purchased and it’s like my parents gave me money to begin with since I planned on putting 30% down anyways.  I’ve already discussed this option with two brokers and they said it’s no problem to go this route as long as I get a cheaper price.

    Even though I go through escrow twice, I overall save money in the long run due to the cheaper property tax and overall lowered amount borrowed.

    The money my parents temporary let me borrow is a “loan” not a gift so it goes back to them without any cost or tax implications.

     

    #171893 Reply
     Tim 
    Participant
    Status: Accountant
    Posts: 600
    Joined: 09/18/2018

    Ahah! There is a big assumption that the seller will prize your cash 💰 more than a lenders cash. I would assume you would still have appraisals, inspection and title insurance. You can still do back to back closings.
    Wholesalers for flips do it all the time.

    #171910 Reply
    Liked by Zaphod
     Al3x 
    Participant
    Status: Resident
    Posts: 6
    Joined: 04/15/2017

    Haha thanks guys for listening to my “assumptions”, turns out they have no preference to who’s cash it is!  I am going with a lender and doing the traditional route!

    Thanks for listening and I’ll keep you updated if anything changes

    Alex

    #171912 Reply
    Zaphod Zaphod 
    Participant
    Status: Physician, Small Business Owner
    Posts: 4782
    Joined: 01/12/2016

    Haha thanks guys for listening to my “assumptions”, turns out they have no preference to who’s cash it is!  I am going with a lender and doing the traditional route!

    Thanks for listening and I’ll keep you updated if anything changes

    Alex

    Click to expand…

    Yeah, I’ve never once had any idea or gave a damn whose money it is. I certainly wouldnt be changing my price due to those things. Its just not a material worry or time frame kind of situation.

    #171925 Reply

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