Sub 2 Seller Wants To Qualify For A Mortgage
I am buying the sellers home Sub 2
The seller wants to immediately buy another place using a mortgage.
What would look best to their prospective lender?
Possibilities:
A contract for deed? (think its also called an installment land contract)
A note covering PITI and any amount they have agreed to carry?
Others?
Thanks
JGK
JGK,
When you close with the sellers, there will be a HUD-1 form generated.
Make sure the sellers have a copy of that, and the purchase and sale agreement, along with your contact info.
They can give this to the new lender, to verify the house was sold.
That should be enough, provided the sellers are otherwise credit worthy to get a loan anyway.
Sometimes however, you need to be aware of this, lenders will want to see proof that you are indeed making the payments on the old loan.
The only cure for that is time, to gather cancelled checks from you as proof.
Completing a land contract with the sellers, for the sole purpose of providing it to a new lender, is fraudulent in my opinion.
Because its a false, dead contract.
Plus other issues are possible later.
Example:
Say the seller says later, "Hey, we want this loan out of our name, and NOW!"........and when you say no, they contact an attny, who they show the contract for deed to, or land contract, whatever you use, saying, we signed this with the buyer, along with a bunch of other paperwork, and they gave us this........
Even with proof, paperwork, paper trail, witnesses, etc, a judge could wake up on a bad day, see you as a slick equity theif/con who told the sellers you were buying with a contract sale, then snuck a deed under their nose.
Not a good place to be........and hard to avoid with your signature on an installment contract.
Anyway, my thoughts............good luck,
Jim FL
[addsig]
Thanks Jim
I am just getting such differing advice from brokers who havent seen deals like this that it makes it hardwho to listen to.
ILC...I probably didnt explain this well but with an ILC I do not get the deed . Its held in escrow so that I have to perform to get the deed ---as does the seller . When someone pays me off I perform on the ILC by paying off their loan and get the deed and then deed it to my buyer. Damn snappy eh?
John
Thanks for the insight . It sounds like I could have been croc food using this idea...
I see what you mean about potential for trouble as a motivated seller is already in trouble and me "buying" their house wont change their circumstances and they are likely to head into more trouble.
What if the property is put into a trust first and then the beneficial interest is sold using the ILC to my entity then the future personal issues liens or bankruptcy of the seller dont come into play...do they?
Let me ask you a more fundamental question. I was shown the ILC method so that the seller would be able to show a contract to a lender that showed his first mort was getting paid and so could wash the first mortgage (to 75% at least) and get a new mortgage.
If this isnt feasible what do you do If sellers will only sell to you if they can get something like that? (ignoring the point of just how motivated they are) What would you suggest?
John
John
Thanks so much!
Little by little the shroud is being lifted from my eyes.
Yes I will definitely get the beneficial interest transferred to me /my entity if in trust!
re a 2nd mortgage I have an appointment this afternoon with a seller I know is worried about getting a 2nd mort so I will use this line of thought.
Thank you I really appreciate iyour help and insight.
JK