Question about buying a house (not using your entire loan).?
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I've heard many stories in the past about how this has been done, but all of those stories have been about 7 years ago, so maybe things have changed, maybe not. Here's the situation I'm trying to figure out. To put it simply, I have 100k pre-approved FHA loan from my bank. The house I like is selling for 90k. Am I able to attatch and "addendum" to the sale of the house to where I'll pay 100k for the house and the seller would then be obligated to give me a 10k check for "house improvements". That way, he gets what he wants, I have money to put into the house, and the bank gets all of the interest since I'm using my entire loan rather than just 90k. In case it matters state by state, I do live in Ohio. I'm asking because my buddy did this with his house he bought 7 years ago. Granted, it was 7 years ago and things may have changed. He bought a house for 160k to use his full loan amount. The house was going for 150k. He paid 160k on the house and the seller had to give him a 10k check on the day of closing for "housing improvements". Keep in mind this is an addendum attatched to the sale. In other words, the bank doesn't necessarily need to know about it. It's a "back door" or way to get around the problem of needing money to put into a house when you don't have any. It's just like a seperate contract between just you and the seller that he is going to give you "Xamount" or in my case 10k for buying the house. Simple as that. My main question is... Is this legal? If so, are there any tips on how to do this just in case it's in that "grey area" so it is truly legal and will be okay?
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Answer:
What you are wanting to do is fraud. You need to have it all in hte contract, the house has to appraise for the 100k and the improvements need to be specified. it is legal to do, just not the way you are wanting to do it. The way you are wanting puts everyonr in jail and both brokers and the lending officers lose their license.
Landlord at Yahoo! Answers Visit the source
Other answers
It's legal. That's actually done a lot, for the very reason you cite: so that a buyer can borrow the cash to fix the property up. However, the house had better appraise for more than the amount you're borrowing, or the loan will not be approved.
Steve M
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