All Forum Posts by: Randon B.

Quote from @Chris Seveney:

@Randon B.

Work with a 3rd party MLO to do the loan for you and qualify the borrower

I believe you can do a balloon but should be no less than 5 years for the balloon.

 Yessir, working with Texas Prime lending to go through the qualifying/disclosure processes.

Quote from @Bill B.:

This is a paid off house? Or a house you can pay off with the buyer’s deposit even after paying the realtors? (Since your mortgage will have to be paid off at sale.)

Are you targeting buyers who can’t qualify for normal financing or selling for a lower price/interest rate to encourage the seller financing? 

Don’t forget, if interest rates drop in a year they can just refinance and pay you off so you are only guaranteed payments if interest rates go up and you’re charging under market rates, possibly losing more money on the deal. 

Be very careful with any loan dons for owner occupants, too many laws you don’t want to violate. Maybe involve a loan services. Good luck. 

This house is paid off. Yes thats fine if they pay me off in a year. Im not really targetting anyone besides those that can prove income and are wanting to buy a house. Yes that is why Im here asking additional questions. 

I am about to put a house up for sell and I would like to sell finance the note. I was told that if I was selling to an owner occupy then I could not add a balloon as part of the note. Though if I was selling to an investor I could. 

How do you differentiate between an owner occupy and an investor during the procuring process?? Is it as simple as just asking? But who's to say they wont rent it out after closing etc?

I was told that if I was selling to an owner occupy then I could not add a balloon within the note. Though how do you know if they are not just going to act as an investor after closing and then rent it out? 

Id really like to have a balloon on this note.

Quote from @Bill F.:

@Randon B.

Seems like you've done your research and have your ducks in a row. 

Only addition I'd have centers around making sure that the property you have for sale lines up with the type of buyer who would likely use seller financing. 

As a rough rule, the most creditworthy applicants get the lowest rates since they have the least risk. Another rough rule is that seller carry rates are higher than traditional mortgage rates since the seller had concentration risk (they only have one loan and not thousands like a bank or GSE) and they have a higher cost of capital ( you want to grow your money whereas people who buy bundled mortgage loans have other objectives) 

All that to say, the buyers who will most likely find your plan attractive fall into the sub-prime category ( have some combination of bad credit/ no credit, filed for bankruptcy, or have been denied for a traditional "prime" loan). Nothing wrong with being sub prime, but if your home is in the top 5% for the market the odds you'll find a candidate fall drastically. If the property sits more around the starter then the plan seems great! 

Quote from @Bill F.:

@Randon B.

Seems like you've done your research and have your ducks in a row. 

Only addition I'd have centers around making sure that the property you have for sale lines up with the type of buyer who would likely use seller financing. 

As a rough rule, the most creditworthy applicants get the lowest rates since they have the least risk. Another rough rule is that seller carry rates are higher than traditional mortgage rates since the seller had concentration risk (they only have one loan and not thousands like a bank or GSE) and they have a higher cost of capital ( you want to grow your money whereas people who buy bundled mortgage loans have other objectives) 

All that to say, the buyers who will most likely find your plan attractive fall into the sub-prime category ( have some combination of bad credit/ no credit, filed for bankruptcy, or have been denied for a traditional "prime" loan). Nothing wrong with being sub prime, but if your home is in the top 5% for the market the odds you'll find a candidate fall drastically. If the property sits more around the starter then the plan seems great! 

 Thank you so much for the great reply. Yes this home sits at the low end of the median range for the area. I really don't want to have to go through a foreclosure( but understand that is possibility) so I do plan on picking a good candidate with income and a better credit score. 

Quote from @Steve Vaughan:

You look very prepared. 

I've sold a dozen with SF and just used a title company. They have attorneys in their network that write 'mortgages' for a living for about $300. It will definitely have a DOS clause. A balloon is up to you.

Have a quality agent do a CMA to nail down your home's value and ask top of the range.

 You won't need a listing agent to find a buyer and if the buyer has one, add their fee to the price.  I state that in my for sale postings. 

 Good idea for the buyer's agent fee. Thank you

My* sorry for the typo. It wont let me edit the title

I bought a house a few months ago with the intention to hold as a rental but learned my lesson to not buy houses built prior to the 80s, 70s at most. I've gone over budget not terribly but enough to where I just don't to mess with this house anymore.

So I figured this may be a good scenario to try out selling owner finance and still make a decent profit in the long term. I originally considered doing a refi and then wrap selling. But this should be much cleaner. I own it outright and do not need the cash currently.  If for whatever reason I need the cash it is my understanding that I should be able to find a buyer for the note. (Potentially)

I have never sold owner finance before, though I have bought OF and bought using a sub to strategy.

1. The house is updated/remodeled and just about ready for an occupant.
I am in the beginning stages of seeking out a buyer. I have started networking with MLOs and realtors. I also plan to put a sign in the yard with monthly payments and down payment % needed.  I initially thought that I'd be able to structure the note with a 5 year balloon but found out that unless I was selling to an investor that I was unable to do that. SO I am looking for an owner occupant and will just hold the note. 

2. I have contacted a MLO service to handle all of the paperwork/disclosures regarding dodd frank etc. Totally worth the fee in my opinion. Once I find a buyer I am to direct them to the MLO to begin "qualifying" them. Though it is my understanding that I make the final decision whether they qualify or not. 

Side note: I know a lot of people don't care and just say that if they default you foreclose and take the house back. I really don't want to have to do that. 

3. I am planning on using a standard 1-4 contract with the owner finance addendum and closing with an RE attorney that is experienced with owner finance transactions. 

4. Its my understanding that I need to direct the attorney to write in a mortgagee clause regarding the insurance. Does that sound right???

5. I plan on using a note service company to hand and direct the payments to me, taxes and insurance. 

6. Should I add a due on sale clause?

That's about all that I can think of currently. Is there anything I should add? I'm really appreciative of any feedback/critique here. 

Is there absolutely no way to get a line of credit on an owner occupy duplex in Texas? I have about 300K in equity and from what it seems is that I am unable to touch it unless I sell (not going to happen). 

Am I able to get around this with a private lender perhaps?

Only problem with doing the cashout refi is that you're now considered an investment property and the rates change. SO DUMB