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I have a house i was advertising as a lease option at $80,000. I have aldy who wants to finance the house with $8,000 down and $700 per month. I have done a few owner financing deeds with wraps and also with Land Contracts, especially in the days of the first time home buyer credit. I have shied away from advertising Owner Financing the last year or so because of the new federal laws and regulations. The last time i did one we had a guy put down $15,000 out fo his 401k and we hired a mortgage broker to process his application and do the “approval” for about $250, which was paid at closing. That was on a full wrap where the buyer got title.
I own this house sub2, with escrowed taxes and insurance, so I believe a wrap where the buyer gets title is out fo the question, though i may be mistaken. I’d prefer to do this on a land contract.
I usually tell people that i will have them on a lease option until they make 12 consecutive on time payments before i will move them to owner financing, but since she has a substantial downpayment and very stable job and rental history, i’m fairly certain she will perform admirably.
Are there any updates to the lending laws i should be aware of as an investor selling with financing to an owner occupant?
Well, this particular house was purchased sub2 the existing loan, not with OF. Can you wrap a sub2 loan with OF? I’m planning on just doing a land contract with this deal, but jsut in case, i’d like to know.
The last time we did one of these we had a private lender on the underlying loan, and we hired a mortgage broker to handle the paperwork/loan app like you mention, but he charged $595 to do his part. While his role did make the transaction possible, i have a hard time paying a mortgage broker that much money when i’m the one putting the whole deal together.
Has any one else hired a mortgage broker recently, if so how much did you pay them to do this type of service?
Turbine,
You can wrap a sub2 with seller financing, but there’s always the risk that the underlying note will be called, but very rare. I could argue to not call attention to yourself with the underlying note holder, however, if you keep it current, the chances of them calling it are rare. I would argue to put the property in trust for this transaction.
Now, if you want your cash out, there’s an argument for a short note, but in that case, there’s a stronger argument to just do a lease option (or contract for option…. safer) and let your tenant get their own financing. The numbers “could” be identical to the above, but gives you more protection, and is easier.
Now, if you have little in, and are making your money on the spread, you may want it to continue forever, and that works, too.
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