HELP! SHOULD I DO THIS DEAL?

I am in the mortgage biz. I have a client that was referred to me that can't afford her home. There is no way I can get her a loan - major credit issues - and she needed 100% financing.

Anyhow, they make good money. Medical collections killed her credit.

Plan of action: Have her assign to me the contract. I buy for 138k. Charge option $ 4-5K. Charge her monthly mortgage pmt. $200 above PITI.

ISSUE: Is it worth doing L/O deals like this when I'm not making anything on paper on the home itself? Is it still worth doing a deal with the other two profit centers built in?

Thx so much!

Comments(5)

  • rajwarrior18th September, 2003

    You don't give enough info to get a good opinion, but I'll try w/ a few assumptions.

    She assigns you the contract for a purchase price of $138K (her original buy price). You then sell to her for $5K down, $200/month over PITI and total purchase price of $138K. If this is correct, then there are a few flaws in your idea.

    First, if she needed 100% financing, how is she going to get $5K for the down?
    Second, your total pay price will be higher than $138K allowing for closing costs (est $4-5K). Usually you'll need about 5% down which would bring your total out of pocket money to about $11K.
    Third, if everything else worked out, would she be able to qualfy for a loan within 1-2 years?

    Using these figures, if she leased for 18 months, you'd be in the hole for about $3-5K.

    Roger

  • GFous20th September, 2003

    My reaction is like above. Numbers do not seem to work, and if they did work like you say it will, there is still too little in it for you.
    [addsig]

  • hibby7620th September, 2003

    What if she moves or forecloses? Where would you be then? Seems like the risk is not worth the return.

  • bankinstev22nd September, 2003

    Thanks so much for all of your responses! Apologies for my limited info., I was trying not to be too verbose.

    I guess what I was thinking was that the money she was going to use for closing costs would have been what she'd have used for the option fee. Then, my profit each month over PITI was what made it attractive. However, you've made me see the light.

    I've been anxious, b/c I've been looking for my first deal for so long, and this feel in my lap, so I guess I was stretching to make it work. I'll continue to be patient.

    All the best,
    Steven

  • classimg22nd September, 2003

    Thanks for the clarity. We suggest that you do not loose the fact that she is NOW added to your buyers list. Meanwhile her property is in the back of your mind. Could a subject to for another investor work? While you move her into another property, possibly make something on that transaction.

    Food for thought.

    Eric & Rosa
    [addsig]

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