It is possible for you to purchase with ABSOLUTELY no money down or out of pocket. It is all negotiatable. When you find that TRULY MOTIVATED SELLER that is the perfect time.
Be extremely careful when purchasing that way it may cause negative cash flow. Many people go out of investing quicker than they come in as a result of no money down deals worked that way. Let the numbers speak for themselves and stay away from the idea of making it up in market appreciation or tax depreciation it never works out, unless you have deep pockets.
Pat
I have a very novice question that I see a few other on Newsgroup II also have. Carlton Sheets talks about No Money Down Deals. I understand that does not mean the seller does not get money, just no money comes out of my pocket. When you look at a HUD-1 statement (see below)and the seller pays all the closing costs, do all of these things get covered? Do some get tacked onto the loan or selling price so that you don’t have to show up at the closing table with cash? Is it true that you can structure a deal (in a straight purchase, not a flip or L/O, etc…) where you do not have to show up with cash at closing - or are there always going to be some costs that a buyer will have to come out of pocket on? If so, do you estimate that it will usually cost you x% (I realize I’d have to confirm for my area). Just want to make sure that I don’t underestimate my costs. Thanks for bearing what is probably a trivial/easy question for most of you.
ITEMS PAYABLE IN CONNECTION WITH LOAN
Loan Origination Fee %
Loan Discount %
Appraisal Fee to
Credit Report to
Lender?s Inspection Fee
Mortgage Insurance Application Fee to
Assumption Fee
Mortgage Broker Fee
ITEMS REQUIRED BY LENDER TO BE PAID IN ADVANCE
Interest from to @$ /day
Mortgage Insurance Premium for months to
Hazard Insurance Premium for years to
Tax and Assessments
VA Funding Fee
RESERVES DEPOSITED WITH LENDER
Hazard Insurance months @ $ per month
Mortgage insurance months @ $ per month
City property taxes months @ $ per month
County property taxes months @ $ per month
Annual assessments months @ $ per month
Aggregate Adjustment
TITLE CHARGES
Settlement or closing fee to
Abstract or title search to
Title examination to
Title insurance binder to
Document preparation to
Notary fees to
Attorney?s fees to
(includes above items numbers; )
Title Insurance to
(includes above items numbers; )
Every one of these items isn’t charged on every deal…just some of them. As an example, one of the items is the VA Funding Fee (it’s part way up). Obviously this fee doesn’t get charged unless you’re dealing with a VA loan. You’re not going to have assumption fees unless you’re assuming a loan. So take a closer look at what you printed…I think it will make more sense to you.
You can flip properties without money coming out of your pocket. But stop and think about something. In any transaction there are going to be some closing costs. There is probably going to be title insurance as an example…and probably some recording fees to record the deed. Someone has to pay these charges. That someone has to be either you or the seller, or alternatively someone you flip the property to or assign it to.
What the closing costs are will depend on your area, and what type of deal it is. Why don’t you call a couple of title companies, tell them you are going to be doing some deals, you’d like to come out and meet them, look over their operation.
When you get there have them show you around. Meet the people. Make a few friends. Take a look at the title plant if there is one. Buy someone lunch. Talk to them about how they go about things. When you’re through, go see another title company the next day. Do it all over again. Things will start to gel.