When Transunion, Equifax, and Experian PLC sent out information on credit scores in April, some risky credit applicants may have appeared more creditworthy than they really are. Thanks to a decision to remove tax liens from credit reports, potentially risky borrowers will have a better chance at getting approved for loans and other credit-based requests, including tenant applications. The move is intended to prevent a single negative event (failure to pay certain taxes) from preven…
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Are you thinking of investing in real estate? However, you don’t have enough money to accomplish this. Here is a tip you may use as long as the property seller is willing to negotiate along.
To be fair, not every seller will be willing (or even understand) the concept outlined. Your very best gamble is to locate a property that the owner has great interest in selling, whether because they are moving, divorce, or frustration with the folks renting the property.
Actually, if you are currently renting and thinking of using this technique perhaps your landlord would be happy to help you out! There are some variations that can be used depending on you and your owner. Do they need the market price or are they just desperate to get out of the monthly payments – maybe facing foreclosure?
The easiest way is to take over their mortgage payments – called ‘assuming’ the mortgage. You will have to be approved by the initial lender to presume the mortgage. If you can’t get approved for an assumable mortgage you could as well try a ‘subject to’ assumption where you merely make obligations while the property remains in the seller’s name.
You take over the original mortgage and create a 2nd mortgage on the remaining cost of the property with the seller. Offer a high, interest-only payment for a short time frame – two or 3 years. Instead of having the money sit down in a bank they can be getting a high interest over two or three years with the rest due in full at the end of the investment term.
When the term ends you ought to be able to refinance the cost, or you can sell. Unless you hit a genuine bad market the value of the house should have risen in that time.
A lot of mortgage lenders merely need to make a great investment. While your local bank could still be lacking confidence there are lots of financial lenders that would wish to make a deal. Financiers prefare real estate. The mortgage is mostly around 60-70% of the value of the property, so as long as they know they get their money back in the value of the property if you default, they do not care what kind of income you make. Complete the deal with a 2nd mortgage created with the seller. If you default they could still foreclose on the property and sell it, paying off the existing mortgage with the proceeds.
Now you can see the whole picture. It is good that seller and buyer may work hand in hand. If they can’t wait for a sale, you can still give them their asking price with a little overall flexibility on their part.