All Forum Posts by: Kevin Romines

I have occasionally watched the new rules coming out of the Frank Dodd/CFPB regarding owner financing? It seems that they recently finalized the rules and now require a person to be licensed as a loan officer if they provide more that 1 or 3 owner financed deals in a year? Does anyone have deeper understanding of these rules changes and how it will affect an investor that sells their properties via owner financing as an exit strategy?

I would advise that you always require a renter to get a renters policy for a couple of reasons. Typically the monthly premium amount ranges between 7-18.00 per month depending on contents coverage, fire district rating and the tenants credit.

What does the tenants renters policy do for you the owner / landlord? It creates a additional layer of protection for the liability in your policy. The 1st coverage that comes into play would be the tenants policy, and your coverage would then be secondary.As you know, you really dont want claims on your policies if you can help it.

As far as proof, you should put a clause in your rental policy that requires them to add you as a certificate holder. By doing this, you will be notified if their policy ever lapses. This comes directly from the insurance company, so your not dependant on the tenant for updated info.

Many of the larger metro apartment companies now require renters policies and to be added as certificate holders for these very reasons.

You mentioned that you wanted to use the FHA loan to buy the property to use as a rental. However the loan officer has you approved for an owner occupied loan at 3.5%. Typically FHA is only for owner occupied, however since I left the business a few years ago, they may have developed some non-owner occupied financing.

If you use the FHA financing as an owner occupied purchase, you will be required per the Note to occupy the home for a min. of 1 year before you make it a rental.

I quess I'm a little confused as to your specific game plan?

Thanks Dawn

I have since located the specific contract for deed for my state. I will make some additions as well, but use the basic language of the document for my state.

Thanks for responding.

I am looking at putting together some contract for deeds. I have typically done lease options and standard contracts, but wanted to see what your contract for deed might look like if your willing to help me out?

Thanks in advance for your help?

USDA and VA are the only 2 loans that provide 100% financing. You could however have the seller carry a contract for 100% for 1 year and then refinance the property based on the max. LTV the lender will allow (FHA 97.75%) of the appraised value.

You could also take on an equity partner in the deal with both of you on the loan, or at least the partner with the down on the loan with the other partner quit claimed to title after. This is an acceptable method because either 1or both are qualifying for the loan.

Keep in mind that all mortgage loan applications clearly state that it is a violation of federal law to materially misrepresent any facts or omissions of facts in making a lown application. This is followed by a very large fine and I believe up to 5 years in prison. Not worth it.

Bruce, I'm not sure if this will work for the seller, lender and yourself, but check and see if it will? What if you paid for the siding on the property and used this infusion of cash as your down payment that is required by the lender?

I would start with your lender, explaining the situation and letting them know that you have come up with this solution as a way to complete the deal. Make sure they are okay with it and how they want to see it documented. Then approach the seller to see if he is open to the idea. If so, document things very well, so your loan doesnt go sideways and then complete the deal.

Again I'm not sure this is an acceptable means of getting this done, but the worst they can tell you is no, and then its on to other methods.

One question I do have is, if the seller is serious about selling and is close to closing, and the lender requires the repairs to be made, does he think if you went to a different lender that it would be any different? Sounds like a somewhat unrealistic seller?

In my state you can do a lien search through a title company for about 53.00 which can add up over time if your looking at many properties. However I like this method best because the title company when they issue a title report, it is insurance that you are buying. Basically they are saying these are the liens against the property, if you find out after closing that there are other liens that were not disclosed via the title report, then the insurance company must eat those liens.

Thats why its called title insurance. Also it gives you a chain of title, which is required by most lenders, as they look at the chain to see if there is anything outside their guidelines. If there is something outside their guidelines, you can cancel the deal and cancel the title insurance for about a 53.00 cancellation fee.

Its not as quick and easy as something online, but its considerably safer on a property that seriously considering going forward on?

I'm not in the mortgage business anymore, but it used to happen all the time. Its not easy at times, but its doable. If the materials are a problem the owner of the home can get a temp line with the materials vendor then the contractor is just putting their labor and profits out there until the closing.

What makes this work is that the buyer is fully approved with all loan conditions signed off except the replacement of the siding.

Creative gets deals done.......Yes is can and has been done. I know that for a fact, I have closed loans in the past that used this technique. Basically its somewhat the same as the lender doing an escrow holdback of 1.5% of the total project costs.

You can check with the lender to see if you bring a contractor in to do the work and also place a lien on the property, then could that contractor get paid at the close of escrow. If thats acceptable, then you just need to find a contractor that will work in that way? It shouldnt be that hard to get that done.

Most lenders dont do an escrow hold back any more, because the only way that they have to assure that their collateral is up to their standards to require it be done prior to closing.