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Real Estate Home Mortgages/purchase house from girlfriends father


My girlfriend has lived in a rental that her parents own for the past 6 years.  We have decided to purchase the house and property, do some remodeling and then sell in 12-15 months, basically a flip.  I have quite a bit of equity from the sale of my house (30K).  I do not wish to use this at all or very little as I will need to use some for cash to do the remodel myself. (sweat equity)  My credit score is 680 and this is what would be used.  My options:
$205K purchase, fha 30yr loan, pay the down at 3%, closing costs and funds approximately $11K out of pocket.  Interest rate of 3.25%.  Mortgage broker states that we can buy UP the rate to 3.875% and have no out of pocket expense.  Is this correct?
$215K purchase price, with $10K gift of equity does the same thing.
Credit Union states they do not do the FHA but can do a 97% loan on the $205K sale price but can not roll the closing costs into the loan, only on a refi can they do this.  The gifting option here appears to be a hassle.  Full 20% needs to be gifted, if not then 3% from our funds needs to be first on the sale price.
It would seem that the easiest way would be to pay it out of pocket and buy up the rate.  Ideas?

Hi Murray,

Your broker is right. If you agree to accept a rate HIGHER than the par (standard) rate offered by the lender, the lender will pay you cash for that, which you can use toward the down, the closing costs or both.

In your case this seems to be the simplest and the best option to choose.

Best wishes,

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This topic answers questions related to purchasing a home, owning a home, home ownership, mortgage education, mortgage applications, and mortgage needs whether buying a first home or refinancing a current loan. Issues related to home ownership, home equity, mortgage education, refinacing options, home improvment finacing, first time home loans, home equity loans, vactation home loans, and mortgages for investment homes are dealt with here also. Though not the primary focus of this topic, Home Equity Lines of Credits (HELOCS), reverse mortgages, and calculating home equity may also be asked. If you do not see your home mortgae, home finacing, or home equity question answered in this area then please ask a question here

Real Estate Home Mortgages

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Eric Forster


Did your last mortgage broker or lender trick you into a messy situation which could cost you your home? I've been close to 30 years in the mortgage industry, and I've seen it all. Believe me, it is not pretty. As the owner of a mortgage company I am called frequently to testify as an expert witness in mortgage fraud cases and other cases where lenders did not fully disclose the terms of the loans they were offering to the borrowers. I have seen fraud being committed by borrowers - and by lenders. It's a tough world out there. And by the way - you are invited to visit my website,


More than 25 years in loan production and underwriting in Southern California.

Mortgage Bankers of America (Southern California Chapter)

Former columnist for AOL Financial Center and the author of a mortgage primer.

MBA (Finance)

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