Loan officer is offering to give me $60,000 extra at the close of sale for a house, is this legal?
Sunday, 6. June 2010
I am buying a house for 5,000, it appraised for 5,000. The mortgage person and the real estate agent suggested that I could take out a mortgage for 0,000 and pocket the extra ,000 at the close of the deal. Basically I would have a 5,000 mortgage with the ,000 cash in my pocket. Is this Ok to do in the mortgage world, I thought you had to take out a home equity loan, after you buy into the house with equity. The APR is 6.35% my credit score is 720
Realtor Angela Says:
Yes it’s legal however go for a different option. Tell him you want a no cost HELOC in the amount of $60,000. this way you are not borrowing the money now and paying interest on it. Instead you basically have a $60,000 credit card with a zero balance that if you ever need to use in case of emergency, or home renovations it’s already available. you only pay interest on the portion you borrow. never use it you never pay. He won’t make as much in commission this way but there should be no reason he can’t give it to you.
Jon Says:
As far as I know there is nothing illegal about this, However there are downsides to doing this. The obvious one is that you will end up with a higher monthly payment with the 355k loan instead of 295k. The monthly payment will be about 20 percent higher (60/295=20.34%). Also you probably will have to pay more private mortgage insurance since you have a loan for a higher percentage of the appraised value.
If you have other debt right now at rates higher than the 6.35 percent it would be worth it to have the cash from the loan so that you can pay off that debt right now and save on the interest for those loans.
Anything beyond that is basically a bet that you can get a better return on the money through investments than you end up paying in added interest and insurance.
Jacque w Says:
SO they are inflating the sales price to its appraised value, when they may be using an inflated appraisal. Technically your borrowing the equity, and if the market bottoms out your upside down.
Its considered fraud, because something has been inflated along the way to give them that sort of money to give you. Then again, I don’t know if the time getting caught for the crime is anything compared to the rest of the fraud running rampant in the industry the last 5 years.
However if you pull out the equity and don’t blow it you may find this is your nest egg to get you through our downturn in real estate.
However you have to understand you should do what you think is best, I think your agent is advising this without prejudice unless raising the sales price or loan amount also increases any commissions they are paid.
Cardinal Rule Says:
Your representatives just want higher commissions on the artificially inflated selling price. In addition to the higher mortgage payments, you’ll have higher property taxes as well. Don’t do it, get a HELOC if you want access to the equity.
Also, it is fraud if the lender isn’t fully aware of this arrangement.