Need Advice On This Kind Of Transaction...
Since my FICO is only 597, my realtor suggested that we go with a private lender (an Investor).
He explained that the investor gets 100% of the loan on the property and assigns me a deed on it, stating that I shall purchase the property within 2 years. Considering the following:
1 – I would be paying the remaining balance to the seller; later when I qualify for a loan and upon exercising my buying/transfer rights.
2 – The investor will charge me a higher interest rate (6.25% and 8.99%), when compared to the original loan
3 – Everything would be recorded on Escrow
I am very confused about this kind of transaction, as I am new to this.
I was wondering how I should proceed towards this. Is it a common type of transaction? What should I watch for? Should I have a lawyer take a look at the agreement?
Any help would be really appreciated.
Cheers,
Baco 8-)
I'm not completely clear as to what you (or your broker) is trying to do here. The details are a little fuzzy.
However, from what I gather, you need to just find another broker. I don't know your financial situation, but you should be able to get a loan with a 597 score. Granted, it would be a higher interest rate (around 8-9%), but sounds like that is what this investor-lender is going to charge you anyway.
Roger
Those terms from that investor are not bad at all considering your situation. However, you can easily do 100% financing with your credit score with a subprime lender with similar rates. They will report to the credit bureau, unlike the investor, and by making your payments on time each month, your credit score will improve, your Ltv will go down, and you will be able to refinance at more favorable terms within 2yrs. That' s the better way to go. I would use the investor for other investor properties.
I agree with DaShow. Go with subprime lender.