Our First Offer Part 2

Hey everyone, wanted to update you on where we are with our first deal. We presented an offer and it was accepted. We started working with a bank but realized after asking a few questions that our goal for the home did not meet the bank requirements. 

We were using a traditional conventional loan with a 10% downpayment. The home is currently tenant occupied so we were planning to let the tenants stay for another 6-12 months while we made minor renovations to the place...

After meeting with the bank they alerted us the particular loan we were using would not allow tenants to be in the home when we closed the deal. They would have to restructure the loan into an investment loan and require a 20% downpayment. 

Soooooo...... We went to the owners and explained the situation. We agreed to keep the current contract price at $140,000 but use seller financing instead of a bank loan. We were able to work out great terms which look like this...

Contract price: $140,000

Loan Interest Rate: 5%

Loan Terms: $140,000 contract price with a 5% downpayment ($7,000), $133,000 amortized over 15 years with a balloon payment at the end of 5 years. 

We are excited and feel like it will be a great deal for us. It has turned from the idea of owning/living in our first home to owning/renting our first home. Currently, the property doesn't cash flow so our goal is to make a few minor renovations over the first 2 years, increase rent from $340/person to $450/person, and have the mortgage covered for the next 5 years. Once the balloon payment is due we will look at other options.. 

God bless,