10-08-2012 09:13 AM
My wife and I put a deposit down on a new construction home last month. 3 days later, we sold our Condo via Land Contract. Since the mortgage from our existing residence is technically still in my name, does it still get calculated with our DTI? I am curious more than anything. We got approved for both mortgages, just wondered if it will make our DTI better seeing that someone else is making the payment. Thanks in advance for your insight!
10-08-2012 03:11 PM
Well, your new lender will count it in your DTI for your new mortgage. They may or may not include the payments you are receiving from the buyer - it depends upon how long you have been collecting the payments from this buyer and if you have been reporting it on your taxes.
A land contract is essentially selling your home on an installment basis. You would need an experienced attorney to draw up a land contract in order to protect your interests. In fact, here in Fl as agents we are prohibited from preparing land contracts; they must be prepared by an attorney.
I hope you have the buyer making the payments directly to you so you can make the payments to the lender because with a land contract you are still responsible for the mortgage payment to your lender. The only way to not be responsible for the payment is to have your buyer qualify for the loan and/or buy the house outright from you with another third party mortgage. If the buyer defaults on a land contract, then you need to foreclose against them rather than just evict them because a land contract really is a purchase agreement and not a lease.