Instant Equity? (PMI, home loan, credit score, refinancing)

[instant_eq]

Hello -

I am currently in a land contract with an agreed upon purchase price of 135k (this was a "family price"). Over the past 18 months we have made improvements to the home and the neighborhood has gotten "hot". Zillow is estimating our house to be worth 230k right now. We plan on talking to the bank in the spring about financing the home and getting out of the land contract. I realize zillow may not be 100% accurate but even if the home is assessed at 200k that's what would be considered instant equity correct? With this potential instant equity could I be looking at a 0 down home loan? My credit score is around 680 but I do have 2 years with 100k+ income.

Thanks in Advance!

[yousah]

Yes, that is how it works.

I've bought plenty of houses on contract that I later refinanced out of. It used to be that you'd recommend a minimum of 5 years on the balloon payment so that the contract purchaser had time to build up around 20% equity. That allowed the purchaser to then refinancing out of the contract without having to pay PMI.

Just a technical consideration- different lenders handle paying off a contract differently. I found that the local lenders considered me paying off a contract with a refinance to be a no-cash-out type of transaction because refi's weren't allowing any cash out at that time. I wanted to pull money out of my house (was an investment) so I wrote up a sales contract with the contract seller at a sales price that represented its market value. The lender then treated that as a sale, and as such, I was able to pull equity out upon closing. The contract seller got paid their balance and I was able to get a check for the equity at closing.