I am considering buying my first home.
The deal involves three parties, and no realtors. (I buy house #1, they buy house #2, and the third builds new. Parties are local, so it is more of a convienience since no houses will be put on the market. Nothing happens until I agree to buy.)
I can borrow 80% at fixed rate, and my particular state will loan me the downpayment at 2%, so I can opt out of mortgage insurance. They say this is a good deal.
However, I floated the idea to the owner of the house I planned on buying to sell me the house 10% less than the deal he offered me (on paper, or to the bank, or IRS) and I would give him 3 or 4 payments in cash, in an envelope, like in the movies.
That way, I could still borrow 100% of the house, but get it at a better price, and lower monthly payment.)
I told him it might show up on an audit, if he had to explain things to the IRS.
It a good idea to try and pay-down the price on the back-end? If I used up all my resources, I could come up with the 20%, but I’d be FLAT broke, and that’s not pretty. Is this illegal? If not what is it called, so I can do some research.
Thanks.
I don’t have any good advice on financing the purchase, but I’ll say this: get a home inspection. Read the report. Then get another one. $600 in inspection fees is worth about $15,000 in potential repair bills.
#2 purchesed the home 5 years ago, I was with him and the realtor, when he first went to look at it. He had it inspected then, and since, I’ve helped him do some repairs about the place, so I am quite aware of the condition. I am in the home regularly.
If I were the person selling you this house, and all I had to go on was your word that you’d pay me 10% of the house’s value in cash in an envelop over the course of several months/years/decades, I’d be so dumb maybe I’d deserve to get screwed over.
There’s a few things in your post that make me think you should seriously reconsider this.
First of all, if they only approve you for a loan worth 80% of the house, you probably can’t afford the house. I don’t know your financial situation, but your mortgage should be at most roughly 1/3rd of your take home pay. If it’s more that, you’re making a mistake.
You also don’t want to end up flat broke. You need at a minimum about 5 to 10k just sitting around for those just in case moments. Instead of trying to scrape together that 20%, you need to scrape together maybe 10% and start looking at a cheaper house.
We’re buying a house from my inlaws and don’t have enough money for the 20%. However, they are selling the house to us for less than it’s worth. They’re “gifting” us about 15% of the house’s equity, so we only need to come up with 5% for the downpayment. It works out really well.
Are you on top of the roof regularly? Are you in the plumbing regularly? Are you in the areas where mold may grow regularly? These are the things that inspectors inspect, and are qualified to judge. These things can do you dirt, big time. Roof will be 5k minimum, same for A/C, same for plumbing. Mold may make house uninhabitable. You may be qualified to do it yourself, but if not, these are the costs you’re looking at.
As for your deal with paying the owner, I onlly gave a cursory reading to your plan, but I do know the mortgage is contingent on no ‘secret deals’, because the mortgage company has you sign off on full disclosure of financial arrangements. To answer falsely may get you into trouble.