Bad Idea? - Posted by Jenean01NC
Posted by Jenean01NC on January 17, 2000 at 12:12:11:
I was thinking about using my good credit to help people purchase homes and make some money in the process. I was trying to sale a SFH a couple of months ago and I must have had 500 people call me with bad credit. After 3 months I finally found a buyer who could qualify at the bank.
Here is the idea, is this a bad idea?
I would partner with people who have slow credit, on a home purchase. We would both go on the mortgage note and deed. Since it would be a owner occupied purchase, with my good credit, would they be able to get a 100% loan? I don’t know. Anyway they will pay any down payments, closing cost and fees associated with the loan. They will also have to pay me a $5,000 transaction fee for use of my credit/name.
The mortgage will be paid to a third party (property management firm) that will inform me if a payment has not been made on time (geater than 16 days late). This will give me some response time to save my credit. The third party will mail the payment to the lender on our behalf for a fee inwhich the owner occupant will pay. (Note: I currently use a property management firm to collect my rents on my rental properties and they will pay any open mortgages that I have send me the difference as possitive cash flow for a small fee. They also notify me of any tenants late payments after the 4th and 15th of the month).
The owner occupant will also pay a escrow amount each month for problems, ie lost job, ect to the third party. After 12 months, the owner occupant and I will have my name removed from the mortgage. We will provide documents to the lender that they have been making the payments successfully for 12 months. If thelender does not allow, the owmer occupant will have to re-fi or go to the bank and get another loan on the property completely removing me from the mortgage note and deed otherwise, they will have to assign the deed over to me.
If the owner occupant has 3 months in a 12 months period of late payments of 20 days or more, the agreement between them and I will state that they will have to assign their ownership on the deed over to me. They may elect to continue to live in the property as renters at that point. The payments will continue at the same rate but the escrow amount is now possitive cash flow to me. If they fail to pay rent, then I will evict.
I usually screen my own tenants and most of them have slow credit on charge cards but pay their rent on time, otherwise I don’t rent to them. Sometimes they have judgements for telephone bills ect.
As an after thought, I guess this is no different than a lease option or wrap mortgage…except I don’t plan to put any money in the deal to get the property. Usally on a lease option or wrap, the investor has to put up some money to secure the property from the previous seller/owner. It would seem that the properties (FSBO & MLS listings) would be easier to find since you would not be looking for motivated sellers/owners to let you assign an agreement that you have with them to another buyer. Also, I would not have to buy the property at 10% down or find creative finacing for rehab work.
I know bad idea right! And I know you all will tell me why. Thanks!