Taking out a conventional loan on a property with a lien

[Shervin Fakhravar]

Hello! 

I need some advice and perhaps if anyone knows a bank to connect me with. Currently, me and my team are looking at seller finance deals, where we wouldn't have any loans on the property but rather a lien saying that if we don't pay off the person they take the house back. 

I'm wondering if you know of any banks willing to give out a loan on a property with a lien on it? Say that the property is worth 200,000-300,000$, a loan between 40-60k would be enough, anything above would be nice but unnecessary. From what American Mortgages told me it would not be possible through them as they need to be first in line to get paid if a ''failure to pay'' situation would occur.

But I really wanna hear your opinions on this, taking out a loan on a property that you own 100%, but there is a lien on it. Good or bad idea? And banks, any banks that are willing to work around the lien situation? 

Thanks in advance guys, you are the best! 

[Kevin Sobilo]

@Shervin Fakhravar, First off you need to get your perspective straightened out. You would not own the property 100%. Its the SAME as buying with a mortgage EXCEPT the seller is the lender. So, just like with any other financed property you do not own it 100% free and clear. 

Having a mortgage lien (seller finance) on the property will exclude you from most loans but you may find a lender who will do a second mortgage or perhaps a HELOC in the 2nd lien position.

However, before you even bother to look to loans, do you think you have enough equity. If you bought the property for $100k and the seller financed $50k then you paid out of pocket $50k (plus closing costs) and have $50k in equity. A 2nd mortgage or HELOC might lend you $30k which is 80% LTV ($50k seller finance + $30k new loan).

Keep in mind there is often a seasoning period after you buy a property where they will value the house for lending purposes at the LESSER of the price you paid and the appraised value. So, you may have to wait a year to get a lender to accept a new HIGHER appraised value.