Payment Credit Towards Down Payment Or Purchase Price?
I have heard this both ways. I understand both but still would like some feedback on this.
Figure out how much is needed to cover your expenses, add what you would like for cashflow. This is your base monthly amount. Tell the TB that any amount over that will be credited towards the purchase price (of course the min. amount is still due each month and cannot be credited towards future payments, is non-refundable, etc.)
Now how do each of you do this. Are you going an extra step and saying the monthly credit is good towards the downpayment (so a bank will be more favorable to them) or do you say that the monthly credit pays down the amount due and the downpayment still needs to be paid upon purchase?
(sorry if I am not as concise as I could have been.)
My understanding is that you shouldn't guarantee that it can be used as a down payment because the bank may not accept it as a down payment. If the bank is OK with it, it seems like a great way to help your tenant purchase the property, but its not really up to you. Andy
PS I'm just getting started with this and have talked with several possible T/Bs and that is pretty much how I phrased it with them. Now all I need to do is find a property to put them in!
The monthly credit, just like the option consideration $, will be applied to the purchase price. The purchase price on the contract doesn't change.
Different lenders will view it differently. You should find a friendly mortgage broker that can help your T/Bs. They know who will take it as downpayment and who will not. In many cases it will be treated as a refinance.
Introduce them to each other early in the process so that they can start working on credit issues and such. When the time comes to buy then they will be ready.
Sound advice, thank-you.