Problem With Refi On The Back End
Like many of you, the calls I get on my ads aren’t the best properties, yet I hate to pass up a deal. FHA is picky about the houses they’ll loan on—most recently I learned that newer mfd homes need frost footings up here on the tundra--and I’ve been worried about buying property that FHA wouldn’t lend on later. It’s not a problem when originally selling on a note to a buyer with substandard credit, but what about the back end in 2-3 years, when they need to refi? Hasn't happened yet, but when I balloon my notes, will I run into buyers who can’t refi due to some defect that FHA won’t approve, or can I assume they’ll be able to find a lender somewhere? I know it’s easy to say “their problem,” but I’d rather not have to carry paper to term.
Loon:
Why limit yourself to FHA refi's for your buyers?
I'm not familiar with the frozen tundra up there, but I would shop around mortgage brokers, explain the type of investing you're doing and ask them what they can do for your buyers.
I just did this 3 days ago before a presentation to a seller I was planning to take sub2. I wanted to answer any loan objections she might have and called 3 brokers. 1 didn't call back, 1 was too "conventional" and couldn't help--blabbing about loan "seasoning" and whatnot, but the 3rd was ready and willing to help.
Here's what I asked him: If I bring you a buyer who's been paying me monthly for 2 years for their contract for deed (and I can show loan servicing company paperwork to back it up), even if they had been 6 months into bankruptcy when the bought from me, could you find a loan for them to cash me out? Absolutely, he said. 2 years steady payments goes a long way to mending even BK credit and a good broker has a bunch of lenders at his disposal, one of which can help you. (It doesn't hurt that the loan you are looking for is a refi, not a straight purchase mortgage).
andy