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 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
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|