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HAPPY NEW YEAR! So here we go, its Jan 2014 and we have a seller finance deal with Dodd Frank in action. I think with DF if the borrower is not a consumer the restrictions and red tape is not as severe. Is that correct? This buyer is an “investor” purchasing for his mother in law to “rent” from him. So we are selling a condo on a 15 year note with 10% down and 1k in loan origination fees. We have an executed purchase contract pending loan approval. (our approval of the buyer/borrower)
We want to get an application filled out and some financial info from the borrower/buyer. Does anyone know of a good source to provide this type of paperwork? Our rental application seems like a good start as it covers credit, criminal background and current employer/income.
Thanks in advance for feedback!
If the buyer is not going to be an occupant, then Dodd Frank rules do not apply. However, I still suggest that you VET the buyer by getting a credit application, checking their credit, actually call some of the references, etc.
And document everything you do then keep that proof.
The rental application will do fine for a non-occupant SF
Thanks Jackie!
SO! it turns out the buyer and his wife will be occupying the unit. He said it would probably be for his mother in law but now for whatever reason makes more sense for him and his wife to stay there. So, since this will be our only and 1st loan of the year we would not be considered a mortgage originator
and …
We are going to ask for more down to increase the security of the loan but also, these are the 5 requirements it seems we would still need to meet. I think we are ok here. His applications will show his expenses and we are looking for the payment not to be more than a third of his income.1. The seller did not construct the home. *We did not
2. The loan is fully amortizing (no balloon mortgages allowed). *yes 15 yr
3. The seller determines in good faith and documents that the buyer has a reasonable ability to repay the loan. *applications, pay stubs, etc being documented
4. The loan has a fixed rate or is adjustable after 5 or more years, subject to reasonable annual and lifetime caps. *yes fixed
5. The loan meets other criteria set by the Federal Reserve Board.Are we missing anything here?
Thank You
Dodd-Frank requires a 43% debt to income ratio starting January 1.
You need to check their credit score.
income is one thing. What other debt does he have is another.
The credit report will reveal any debt they have which they did not report on their application.
If it were me, I’d still have a mortgage broker qualify them. It will cost you a couple hundred dollars but then you will know that you have all the right documents.
There are special loan forms that have to filled out for owner occupants. Get help with this Your note and deed of trust are NOT ENOUGH.
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