How does this work?

I will be a new homeowner soon and I am trying to figure out what to do. Here's the scenario; if I am approved for $90,000 and seller decides to sell the home for $70,000, am I allowed to use some of the additional money from the loan for home repairs and improvements?How does this work?
In the conventional market you get a loan based upon the lower of the appraised value or the purchase price. The value of the property is the security for the loan. Your approval is just that: an approval for an amount of money. If the price is less, you get a lower loan amount. You can't get a 1st mtg for more than the value (or purchase price) of the home. It is only worth $70K. What secures the other $20K?





If you have some equity in the home you can get a 2nd mtg. Some of these 2nd's will go up to 125% of the value of your home. I would strongly urge you NOT to get this type of ';upsidedown'; loan. Tax wise, you can only deduct interest for up to 100% of the value of your home. Look into all the details of loans and ask questions if you are uncertain of things.How does this work?
Probably not, unless you can somehow convince the lender that you are going to guarantee that these funds are used for that purpose. Lenders are not thrilled about providing funds in excess of purchase price.





You may be better off to take an ARM for the purchase, then a HELOC to pay for the improvements and later on refinance the entire deal.





Check with your lending source to see what the lenders requirements are.
from what i undrstand you can use it, but you stilll have to pay it back, they will send the extra in form of a check to you, just pay it back right away in my opinion, that is how my school loan works anyway, lol
Yes you can provided the lender will give you the extra money.Depending on your credit they may or may not give you the extra money.
Maybe, ask the loan officer. Often the answer is no.





They often need to document if the value is there to protect the investor in case they have to foreclose. Since the sale price is $70,000 then that will be considered the value in most instances.
Thinking hit the nail on the head and he gets a thumbs up for that. I would just add that there are programs for home improvement/purchase such as HUD 203(k). These are specific products for specific situations. If the home you are purchasing needs repairs, not just things you would like to do, you may be able to do such a loan. It doesn't sound like that is the situation you are in but others who are in that situation may read this.





Your other option is to ask the seller to do the repairs and raise the purchase price. As long as the appraisal comes back for enough, the bank will not bat an eye at that.





Good luck to you.
Most mortgage lenders will not finance more than 90% of the value of the home. So it depends on what the apraised value of the home you are purchasing is. If it is more than 70k you might be able to borrow some extra, it all really depends on the apraised value of the home.