SUB2 On Sellers Credit
If I get a Sub2 deal, the seller is buying another house, he needs to have this loan payed off or off his credit so his loan can get approved. What can I do to let him know that as long as we will be making the payments, will that money count toward his mortgage loan? Can the seller show the bank that his old loan is now being paid by a management company, but the loan is still in his name and on his credit.
What can I tell him so he has nothing to worry about? How long should I keep a Sub2 deal before selling? Should I ever assign a Sub2 deal?
Thanks All
NvestN
I will answer the last one. I think you are ethically and morally obligated to make the sellers payments, and therefore, I personally would never assign a sub 2 deal and hope the assignee makes the payments.
In another words that it will still count towards their LTV ratio, the bank will look at it just like a rental property thats where the 75% is from. Some one really iggnorant will sign a sub to deal, most likely it is a unfair way to get a home but the best was to buy one.
This brings up an advantage of doing your subject to within a land trust. Our tenants are on a triple net lease meaning they are responsible for maintenance and repairs. The Trustee writes a standard letter to the lender informing him that the property is covered bv a triple net lease so the seller has no responsibility for maintenance and repairs, and is in very little danger of a vacancy. These are the two factors that usually lead to a ding against your debt to income ratio. This letter always is accepted by the lender and your "subject to" loan is not counted against you.
Da Wiz
Thats good news, do you have a sample turstee letter ro aggreement, I have another SUb to deal pending, here are the stats:
$406k mortgage balance
$428k appraisal
PITI $3100
$200 assocation per year.
New construction home they just want out, would anyone take this to sub to or let it go?
Thanks
NvestN,
I have had 4 sellers get new loans with no problems. If I was you I would take sometime and learn the ins and outs of sub-to. Many people have many different ideas it is up to you to educate yourself and select the best fit. I have never and would never assign a sub-to deal. Hope this helps
PS I have never used a landtrust in any of my sub-to deals.
J[ Edited by JamesStreet on Date 03/20/2006 ]
I understand the sub2 deals, I agree its simple, then if I add the land trust then it complicates it a bit, will have to keep learning on this.
For now here is whatr I got the seller to agreee on:
Fome being sold for $429k on the MLS been on the market for 150 days, I think it should sell in the summer months for about $415 or so.
The mortgage bal is $400k, I offered $380 plus subject to, he agreed to pay me $10k upfront and remaing $10 in 12 payments. I am getting real good at talking to sellers and gettin my price, now just incase the home does not sell, then I got a $3200 monthly payment and I dont want to screw the seller by not paying.
I have listed the home on craigslist, and some other sites and put a add online. I want to know where is the best place to find buyers FAST... I have a ad running "Owner Finiancing, No Bank Quilifiing" etc.. so far no one called but only been 2 days. Thanks all.
Why would the new tenants/buyers have bought home owners insurance? They dont own the house yet if it is a land contract/installment contract. The people insured on the house would be the orig seller and/or the investor.
Also, I dont understand the bank "partial payments" statement. If I was a bank I would not accept partial payments either, so if the investor was using a LSC they would paying the full mortage payment every month. The payments would be going to the investor LSC from the tenant.
I respect your knowledge mtnwizard and the alternative method you use for sub2. Just trying to find out the true nature of why the DOS was called and if it coudl have been avoided and hwo the suit form the tenants could have been avoided.
-Chris
Da Wiz,
I would be interested to know why the land trust is exempt from the DOSC. If you care to explain I would love to read about this.
Arseknow
I Agree thanks for sharing:
I still dont have 100% knowledge of how to file a Sub2 deal? Do we just sign a deed or land trust ($750) and record it to the state and just take over payments without letting the bank now? I am only changing the payment address. On paper I am legal owner, the loan is still the original owners responsibility, and the bank has a lein on the home. Once recorded will the bank find out that the property owner has signed over the deed or land trust?
Thanks all for much great info
Mr Gary says "Investor picked up a home subject to for $136K, with a $127K note on the property. Sold it on a land contract to his tenant. His tenant bought homeowners insurance and a copy went to the lender who said nothing but called the loan".....
this is the investors fault for not getting the insurance issue out of the way prior to closing with his buyer. he did not do his full job by discussing this with this buyer.
Quote: For their equity, I am going to pay their prop taxes and may and june mortgage payments.
So if they are getting nothing for their equity, why are they worried about living in the house for 2 years? Have you discussed with them in detail that they are getting no cash?