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How Lehigh Valley Real Estate Investor's Finance Purchases

There are many ways that Lehigh Valley Investors can finance their real estate investment purchases. Throughout the Lehigh Valley, Home Buyer's in the Allentown, Bethlehem, and Easton areas are purchasing investment and foreclosure properties using various methods of financing.

Below is a brief summary of some of the available financing options.

Pay Cash

Paying cash is by far the easiest way to purchase a Lehigh Valley Investment Property. When the transaction is a cash purchase, the decisions are totally up to the Home Buyer.

When a mortgage is involved the Buyer is at the mercy of the appraiser and the loan under-writer. Will they find anything wrong with the house that may stop the bank or mortgage company from lending them the money?

A Cash Buyer can purchase any property they want!

FHA Mortgage

FHA Mortgages are popular because the Buyer is only required to put 3% of their own money into the transaction. In most cases, Seller's Assist can be used to increase the mortgage up to 6% to pay closing costs (if the Home Seller agrees). In 2009, the new guidelines require that the buyer contribute at minimum 3.5%.

FHA Mortgages can only be used when the Buyer is going to live-in the property. This is a requirement of an FHA loan. The property must be the Buyer's primary residence.

Even so, the Home Buyer may still purchase an investment property using an FHA Mortgage as long as they are going to live in one of the units (if a multi-unit).

The main downfall to using an FHA Mortgage, when attempting to buy a Lehigh Valley Investment, Foreclosure, or HUD home...or any home for that matter, is the fact that as part of the appraisel an "FHA" inspection is performed. This inspection looks for safety issues or major defects with the house and reports findings back to the mortgage company.

Some, if not all, of these repairs/defects may be required to be Repaired BEFORE the Closing in order for the Lending Institution to finance the property. This can create problems. For instance, any house built before 1978 may require scraping of any flaked paint and repainting in order to guarantee there will not be a problem with lead-based paint.

If the seller is a bank or other business entity, doing repair work to the house before the purchase is typically Not Negotiable. You are buying the house AS-IS.

The potential Home Buyer may have to get inspections done, at their cost, before placing an offer to make sure the property can be financed.

Conventional Mortgage

Financing a Lehigh Valley Property with a Conventional Mortgage requires an appraisel and under-writing approval on the property but depending on the amount of the mortgage some of the repair guidelines may be relaxed depending on the immediate equity (what is being paid versus what is it worth).

The Minimum Conventional Loan right now is a 95/5 with up to 3% Seller's Assist. The Buyer will have to have a minimum of a 5% down payment and any additional closing costs that exceed 3% (if Seller's Assist is used).

FHA 203k Rehab Loan

This is a popular financing option for properties that need work. The loan is structured to lend the money to purchase the property and then do "draws" to get additional money as repair work is done to the house.

The downfall to this financing is if the potential Home Buyer feels they can do much of the work themselves. With this financing, the bank or lending instution, may require licensed contractors to do the work.

In addition, a decision to purchase may be delayed by needing estimates from contractors on what work needs to be done to the house. If it is a "HOT" property, the buyer may not have the time to get contractors into the house.

Home Equity Loan

A Home Buyer, who owns an exsisting home, may be able to take out a Home Equity loan on their exsisting property and use the proceeds to purchase an investment property.

If this is done, depending on how the equity loan is structured, the Home Buyer may be considered a cash buyer.

Financial Counseling should be sought before proceeding since another property may be at risk if something goes wrong.

Want more information about Lehigh Valley Investment Financing?

Questions about Lehigh Valley Real Estate? Give us a call or contact us today.

Joe Finnerty- or -Joe Kaminski

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BHHS Fox & Roach REALTORS, Lehigh Valley PA
3101 Emrick Boulevard, Suite 101
Bethlehem, PA 18020
Main Office: 610-865-0033
FAX: 610-974-9430

Information is deemed reliable but not guaranteed. We are REALTORS® in the Commonwealth of Pennsylvania and affiliated with BHHS Fox & Roach REALTORS. We are not financial planners, tax advisors, or attorneys.

Lehigh Valley Investment Properties serves the following areas Bethlehem, Allentown, Easton, Forks Township, College Hill, Plainfield Township, Washington Township, Bethlehm Township, Bangor, Bushkill Township, Nazareth, Tatamy, Stockertown, Hellertown, Lower Saucon, Freemansburg, Pen Argyl, Williams Township, Palmer Township, Hanover Township, Walnutport, Lehigh Township, Wilson, Wind Gap, Mt. Bethel, Portland, Roseto, Allen Township, Northampton, Bath, Moore Township, Catasauqua, Whitehall, Macungie, Lynn Township, Slatington, Milford, Emmaus, Coopersburg, Center Valley, Springfield Township, Weisenberg, Orefield, Trexlertown, Breiningsville, Upper Saucon, and Saucon Valley. Lehigh Valley Foreclosures, Sheriff Sales, HUD Homes, Short Sales, and Auctions.