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Approved for $250,000 |
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If I am approved for $250,000 and I find a house worth $240,000, can I still take out the whole amount of the loan for $250,000 or am I only allowed to take out the amount of the sales price for the home I will purchase? |
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When you borrow the money, you sign a promise that if you don't make the payments, the lender can try to get its money back by having the place sold at public auction ("foreclosing the loan.") So they certainly don't want to lend you more than the property is worth.
In fact, they'll usually lend you less, because there's no guarantee how much they could get at an auction. Banking regulations says it isn't really safe to lend you money for more than 80 percent of the value of the real estate. That's why they usually need some kind of insurance or guarantee if your cash down payment is less than 20 percent. |
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Edith
Originally published on July 5, 2008 |
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