Buy a House without a bank - what are my options?

Question

Hi everyone! I want to purchase a house (to be my primary residence) for 100K. The seller still has a mortgage on it for 65K.

What are some ways I can buy it without using a bank? I have great credit, just prefer not to use a bank.

Mike G. · Answer

@Ryan K.

a wrap is not the same thing as a subject to.

Subject To:

Subject to Financing Defined. In a subject to deal the existing financing that a homeowner has setup is taken over by an investor. This route is basically paying for the mortgage already in place through an agreement with a homeowner.

Wrap Around Mortgage:

A wraparound mortgage, more commonly known as a "wrap", is a form of secondary financing for the purchase of real property. The seller extends to the buyer a junior mortgage which wraps around and exists in addition to any superior mortgages already secured by the property.

Each has advantages and risks so study up on them.

in a subject to if the lender finds out that a new owner is in place besides the original borrower this could trigger the "due on sale" clause that is in the loan origination documentation when the borrower signed the papers.

Just a few things to think about. Educate and verify.

Mike G. · Answer

@Ryan K.  if the bank finds out there was a sale to you it could trigger the "due on sale" clause that is most surely written in the sellers docs when he closed.

you could do a wrap around mortgage agreement or a lease option possibly. All depends on how well you negotiate with the seller and what terms you walk away with.

Ryan K. · Answer

Is a "wrap" the same thing as a "Subject To" ?

Ryan K. · Answer

Hi Rick

When you say the term "wrap" are you essentially saying a Subject To? or something else?

Rick Pozos · Answer

If the property appraised at 100k, why are you buying it at 100k??? If they "just want to dump the house", then you should be offering 80k or even 85k.

Me, personally, I would do a wrap at the 65k so that I am basically paying their mortgage to the mortgage company. The other 20k I would do a 2nd to the seller with about a 5 year amortization at about 6% interest rate.

This would relieve the sellers from their payment and also give them a small payment every month for the next 60 months. Sometimes you have to let the sellers know that you are trying to offer relief for them.

Ryan K. · Answer

The seller just wants to dump the house. They no longer live there. Its been vacant since June or July. They continue to make mortgage payments in the meantime.

They said it's appraised at 100K, and they owe about 65K on the mortgage. The house is in a fantastic location, but needs updating (cosmetic updates).

Mike, whats the wrap around mortgage you mentioned?

Tyler Kaye · Answer

I would recommend speaking to an attorney of course, but there are several options.  You could get private money from friends, family, or other interested investors.  Although, for it to be your primary residence you are not really showing an option to acheive returns.  You could offer terms that involve owner financing.  That would be where the owner is collecting your payment as if he was the bank.  You could also setup a lease option with the owner where you are renting and your rent payments accumulate as part of the down payment or purchase of the home, if you execute the option within the alotted timeframe agreed upon.  The latter two cases would require that the owner is able to under their current mortgage and that the bank does not initiate the due-on-sale clause that is usually found in their terms.

There are a few ways to make this happen.  However, purchasing a home as your primary residence without a potential ROI for others to include their funds is not going to be very attractive.  Lastly, you could always use cash and pay the full price to the owner.  You could potentially negotiate a great deal because of the power cash has.  Good luck to you and I look forward to seeing how you make this happen.

Buy a House without a bank - what are my options?

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