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Where to start?

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Valued Contributor

Where to start?

We are currently living in the house we intend to by.  We are currently renting with the agreement to buy it.  The house needs work.  Some important stuff like new windows but mostly a lot of cosmetic.  He wants $25k.

 

I have called places and they say they don't loan under $40-50k.  FHA and USDA, I'm told, won't lend for a house that needs repair.  If they do and they add the repair cost into the loan, you must hire the work done-which we would prefer to do ourselves to save the money.  I've called our personal bank and he said with the recession that lending for purchases of this nature aren't very easy.

 

We don't want to just continue renting to own.  Yes, I'm sure he would but that isn't what we want to do.  I'm fine borrowing the $40-50k if the home value supports it.  We can use the money for repairs.

 

One mortgage co said we had to have 12 mo cancelled rent check but we have lived there less than a year.  It has been suggested to just borrow the excess and let him give it back to us once the check is cashed.  I'm fine with that and have no problem trusting him to do so.

 

Can any one make any suggestions?  

Message 1 of 12
11 REPLIES 11
Regular Contributor

Re: Where to start?


@Shellie wrote:

We are currently living in the house we intend to by.  We are currently renting with the agreement to buy it.  The house needs work.  Some important stuff like new windows but mostly a lot of cosmetic.  He wants $25k.

 

I have called places and they say they don't loan under $40-50k.  FHA and USDA, I'm told, won't lend for a house that needs repair.  If they do and they add the repair cost into the loan, you must hire the work done-which we would prefer to do ourselves to save the money.  I've called our personal bank and he said with the recession that lending for purchases of this nature aren't very easy.

 

We don't want to just continue renting to own.  Yes, I'm sure he would but that isn't what we want to do.  I'm fine borrowing the $40-50k if the home value supports it.  We can use the money for repairs.

 

One mortgage co said we had to have 12 mo cancelled rent check but we have lived there less than a year.  It has been suggested to just borrow the excess and let him give it back to us once the check is cashed.  I'm fine with that and have no problem trusting him to do so.

 

Can any one make any suggestions?  

I suggest you don't even think about doing this. Apart from putting yourself at serious risk... It's fraud.  

 

Message 2 of 12
Valued Contributor

Re: Where to start?

@EricDET Why in the world would a mortgage suggest me do something that is fraudulent?!?!

 

I'm just at a loss.  I spent 3 years rebuilding my credit with the goal of buying a house.  And now I can't.  Thanks for your response. 

Message 3 of 12
Valued Contributor

Re: Where to start?

Will the seller consider carrying a mortgage? That would be the usual thing in these cases. I've bought houses that way a couple of times.

 

The other possibility, since the amount is so small, would be to put a decent amount down then get a personal loan for the rest. Yes, it will cost a lot more than a mortgage, but if you can pay it off in a few years or fix the house up and get a "real" mortgage, that might not hurt too bad.

 

Seller financed mortgage seems the best way to go though. Good luck!

Message 4 of 12
Valued Contributor

Re: Where to start?

I could just keep paying him rent but I don't want to.  When we moved in I told him that I would buy it.  I plan to keep my word.  Plus I want to own it so that if we decide to move some where I won't be leaving him with the responsibility of the house and I would like to keep it for a rental maybe.

Message 5 of 12
Valued Contributor

Re: Where to start?

Yes, but will the seller consider carrying a mortgage for you? That was my suggestion/question. You wouldn't just keep making rent payments. You'd sign a contract, probably make a downpayment,, take title in your name, then have monthly payments that go toward the purchase (and toward interest, of course).

 

This is a common thing to do with very inexpensive houses and is pretty standard with houses needing substantial repairs. I've done it several times myself. Sometimes the seller carries a mortgage only for a few years, until you have time to make the repairs and get a bank mortgage. Sometimes if the purchase price is small, you just pay until you're done and never have a bank mortgage.

 

Have you talked with the seller about the possibility?

 

The only big drawback is that seller financed mortgages rarely ever report to the credit bureaus so they don't help your credit, but that doesn't seem to be the biggest concern for you in this situation.

Message 6 of 12
Moderator Emerita

Re: Where to start?

Gunnar's suggestion is excellent.

 

The mortgage has nothing to do with ownership of the house.

 

Many homes are financed with the seller holding the note. You would need to get in touch with an attorney to draw up the deed and the promissory note and the mortgage so it is done properly, but it is the ideal solution to your delimma.  That way you own the property and make mortgage payments to the seller (prior owner). Once you fix up the property you can refinance it into a third party institutional type loan if you still want to do so. There are many advantages to having a private seller held mortgage.

Message 7 of 12
Valued Contributor

Re: Where to start?

I misunderstood.  I'm sorry about that.  I will check in to that.  Thanks

 

Message 8 of 12
Valued Contributor

Re: Where to start?

Good luck, Shellie, and thanks for seconding my suggestion, StartingOver.

 

Shellie, just to clarify: With a seller financed mortgage, YOU OWN THE HOUSE. The seller simply becomes your "bank." Yes, the seller could foreclose if your didn't make your payments (just as a bank could), but the title is in your name and the house is yours to sell, rent, repair, etc.

 

This is very common and not a hard thing to do if the seller is willing.

Message 9 of 12
Valued Contributor

Re: Where to start?

Will this have an effect on him as far as his own accounts.  Say he wants to buy himself a new house or new vehicle, will this situation work against him in that way? 

Message 10 of 12
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