Financing Rental Property Question
Hey all, I have a question regarding what the seller can pay when doing a mortgage. Example- Selling price is $50K mortgage is $45K @ 10%. Is it possible for me to pay the 10% down for the seller and cover closing costs for them? In effect making it a no money down deal for them?
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Hey Joe
I'm unclear about your question. I assume you are the buyer. Are you asking the seller to refi so you can take their loan "subject to"? The 10% is your down payment? A "no money down deal for the seller?"
If all my assumptions are correct, you can give them cash to their existing (new) loan, plus their closing costs if you like. But... if you do, are you still paying well under market value? Wouldn't you prefer to make it a no money down deal for you?
I'm not trying to knock you, but I can offer ways to meet your objectives better if I know what they are.
B
[ Edited by bs4you2 on Date 04/20/2004 ]
No, sorry for not being clear. I am the seller. What I am trying to do is get investors into my rehabs for no money down. They don't have to pay out the 10% down and or the closing costs just the escrowed items like the insurance. The Appraised value is 50K my sale price is 50K I want to put the 10%down for them and then they will have a mortgage of 45K. I still make my profit, they have good cashflow and they don't pay anything out of pocket. I am thinking that I need to find a lender that does't care if the down money is sourced and seasoned. Am I thinking in the right direction?
Thanks
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Yes,
If they qualify they could get a loan that will allow unlimited seller credit.. This would cover 10% and closing costs. Most B/C lenders allow this.
Lori
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Generally Joe this is a really tough thing to do the way you are thinking about it. But there are some alternatives.
Every lender I ever worked with wants to see the $5,000 in a bank in the buyers name with a Verification of Deposit . If that account is less than 60 days old or something like that then they want to know where the money came from. If the answer is you then the deal is not going to make it through underwriting. You could get what is called a "gift letter" from someone (again, not you) saying that they gave them the money as a gift but you can see where people might be reluctant to sign such letters fraudulently.
You may be able to find a lender who doesn't care about such things but I don't think you're going to find them easily. Especially on these kinda low-dollar loans underwriting oddly enough seems to be less flexible.
You could sell the units on land contract no-money down and, after seasoning, attempt to refinance. I'd think that would be easier except for the need to season your contracts for a year. Then the lender will lend on appraised value without worrying about original purchase price or how much they put down.
could the seller carry a 0% 2nd for the 10% down to appease the underwriters??
Lori, what is a B/C lender?
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Also why in the heck does the lender care where the money comes from? If they allow gift funds, why should it matter if it comes from me or old uncle charlie?
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I'm trying something like that and it is like pulling teeth. It may work out though. it just makes me feel dishonest. I would recommend thinking of something else. If you can trust the person you could put them on title and then they refinance. I just did that and refinanced with a HELOC that paid off the seller. That was good. It was from washington Mutual.
Good Luck.
Josh
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Try doing a websearch on the Nehemiah program. It might work for what you're trying to do. (I don't know anything more than what I've read about it)
I dont' trust them only cause I don't know them. I know this can be done it is just a mtter of finding out how.
by the way, I just noticed today that if you do this for your FHA/VA/HUD buyer it is illegal and criminal penalties are stiff. Just put some Florida guy in jail.
No it wouldn't be a fha/va/hud loan. If I am not mistaken, those are for OOC not investment properties. am I correct in this thinking?
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