Can you use the money from home loans to buy other things?
Alyssa asked:
My fiance and I are looking to buy a mobile home. We would have to borrow the money for a down payment and were wondering how the “spending” aspect of home loans work. For instance, we would like to borrow $8,000 from our parents for a down payment. The home itself is 30,000 – would we be able to use the extra money from the loan to pay back the $8,000 as soon as the loan went through? They are moving out themselves and cannot afford to give it to us outright.
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My fiance and I are looking to buy a mobile home. We would have to borrow the money for a down payment and were wondering how the “spending” aspect of home loans work. For instance, we would like to borrow $8,000 from our parents for a down payment. The home itself is 30,000 – would we be able to use the extra money from the loan to pay back the $8,000 as soon as the loan went through? They are moving out themselves and cannot afford to give it to us outright.
I am not looking for alternative answers, such as saving up for the deposit ourselves, etc. I would just like to know if this would be a possibility. Thank you!
I guess I didn’t exactly define it well enough. We would get a home loan for 40 – 50,000 and use the extra money from that to pay the down payment back to our parents. Would that be possible or do they make sure you spend all of it into the house?
December 26th, 2009 at 3:22 pm
If the money is borrowed, it will be counted as a debt and will be taken into account as far as your debt/income ratios. Typically, if the bank is going to lend you 30k for the house, you cannot get an extra 8k to pay someone back or consolidate bills etc. In short, I don’t believe you will be able to secure this type of financing.
December 30th, 2009 at 2:33 am
Your $8,000 down payment wouldn’t be extra money. The bank would take it and the loan will be $22,000. The bank won’t loan you anything more than the purchase price as stated in the contract, and that figure will be adjusted by your down payment. If the appraisal on the home falls short of the agreed purchased priced, the bank will only finance up to the appraised amount. The home is collateral in the event you default, they’re not going to loan additional money that’s not secured.
Added~
No. The home loan won’t exceed the purchase price. If you’ve been pre-approved for a home loan in the range of 40-50k, if you purchase a home for 30k, the bank will only finance 30k. You’ll never see the money as it will be paid the the seller or current lien holder by the title agency (or attorney) that you use for closing.
The banks also don’t look favorably upon down payments that have been borrowed. You also have to factor in closing costs.
January 2nd, 2010 at 11:50 am
No bank is going to advance you 40 or 50,000 on a mobil home that sells for 30,000 even if you have an 8,000 down payment. If you go and talk to a bank you will find out this is not a possibility.
All of a mortgage goes to the seller. There are some exceptions for fixer-uppers but I doubt that mobil homes would qualify.
January 4th, 2010 at 4:37 am
The only way this is possible is if the home is valued for more than you are paying,ie instant equity. If so you can take a larger loan and get the cash. We did this on a refinance. You will need an appraisal stating that the home is in deed worth $40-50,000 for the bank to do this. They won’t care what you do with the extra money as long as you pay them back.