Posted by bobber on October 07, 2003 at 14:59:29:
A woman whose been in a house for over 10 years renting wants to purchase from the City of Detroit at below market value ($25-$30k when market value almost twice that) but is unable to get a conventional loan. She called our ad but explained the only way the deal can be written up is if she is the sole title-holder (hopes of lease option not there).
The numbers work for a lender in this instance since she can afford up to $500 payment/month and has $2,500 to put down on this purchase. We were thinking a loan of $27,500 (we get the downstroke) at 10.5% amortized over 10 years will provide an excellent return and if the buyer fails to pay, we would get a property roughly at 55% loan to value. Seems like very little at risk here.
The only question is that we’ve never been the bank before here in Michigan. Can a private investor draw up a mortgage and note for the purchaser to sign at the closing and if so, what other docs. would we need and what would the potential pitfalls be of “being the bank”? All you Michigan mortgage brokers out there, give me a hand. Thanks !!
Bobber