Hello Everyone!

I am looking at trying to buy my first house. My wife and I where trying to think of a way to do that and pay of some of our debt (mostly school debt). My question is this possible or not.

We found a few houses we liked for about 80,000. What we would like to do is buy the house for 80,000 but when the loan is written we want to add an extra $20,000 to the loan. What we want to do from there is take the extra 20,000 and pay off all of our debt. Has anyone done this before?

I would think that'd be considered fraud.

Sorry Rich, that plan wont work and here is why....

(A short version) You buy a house for $80,000. The house is probally "worth" $80,000. The bank will loan only the "value" of the house to you, which would be $80,000.

Kind of like saying I have a baseball card worth .80 cents. Would you loan me $1.00 if I give you this card for collateral?

Some may say you can under very specific circumstances. If you have PERFECT credit, and Im taking 800+ fico, a bank may offer a 105-125% loan BUT this practice is becoming more obsolete due to the crazy market in some cities.

In summary, nope. Have a nice weekend.

Hello,

Thanks. Figured as much.

You said the bank would only consider it as valued at the sell price? I thought ( I am new to this please don't get to mad) the bank when they do the loan value the house. If that is correct and say the value of the home is 100,000 and the seller is just wanting out of it and willing to sell for less would I be able to get the money based off that? Not saying this would happen. The last thing I want to do is something illgeal. If this is illgeal I will drop the disscusion.

The real question here is how much in student loans are we talking about?
Student loans are usually at very low interest rates so transfering them somewhere else usually doe snot make sense.They will give you extensions or workouts on student loans if you are having trouble paying the payment each month.

You could buy a house as a principle residence say for 80,000 when it is worth 100k market value.Then after you have lived in it 6 months refininace into a new loan for say 105k and pay off your student loans since refinance money is not taxable.

Options depend on your specific situation.Go seek a mortgage professional who can lay out your options and or give you time to work on your issues(raising credit score to get a better rate on a loan).

not giving legal advice

If you're paying 80,000 most lenders will loan the appraised value or the sale price; WHICHEVER IS LESS.

An alternative might be to buy the house for $80,000 and if it's truly worth $100,000 you should be able to get a $20,000 second mortgage after you already own it.

But like SR said; student loan rates are typically very, very low so borrowing to pay them off might not be the best course of action for you.

You need to put a pencil to both scenarios and see which one works best for your financial situation.

I appreciate people like you who go out of their way to ask an innocent question even if it's to a forum. Compared to those who just go out there and do what they think it's best. This forum really does give a lot of good advice. =)

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Why match when you can itzamatch?

The mortgage lender would consider that market factors are creating the true value of that home. I may think I have a painting worth $10k but if all I can sell it for is $7k then that's what it's worth. The value of any item at any SPECIFIC moment in time is what it can be sold for at that very moment.

A real estate appraisal is based mainly on recent home sales in the area adjusted for differences between those homes and the one being appraised. It isn't a guaranty of value but a risk-mitigation method of the lender. Just in case you are buying something for over a fair market value, the lender wants to make sure.

A home loan is a loan collateralized by real estate. You won't find a lender willing to do a loan greater than the value of the collateral. Especially not in the current market environment.

Now if you did purchase a property at a discounted sales price you could look to take advantage of equity in the home typically after living there for 6 months.

I hope this helps.