Posted by Sam on June 13, 2006 at 24:00:09:
Hi Killer Joe-
Then why do I get prime rates for 100% financing?
Seems to me its more of a risk for the bank to loan 100% between the 1st and 2nd than just 80%…
Creating a 2nd - Posted by Sam
Posted by Sam on June 12, 2006 at 15:01:07:
Has anyone sold a house and then taken the profit in the form of a note (or a 2nd) instead of cash?
We want to offer owner financing for 10-20% FMV but the 2 lenders we’ve talked to don’t seem to understand what we’re talking about.
Any ideas or experiences to share?
Re: Creating a 2nd - Posted by John Merchant
Posted by John Merchant on June 12, 2006 at 15:21:34:
I’m not sure I understand what you’re doing either.
“We want to offer owner financing”…to whom?
And do you mean YOU’LL finance or you think you can find a willing lender?
If YOU are the borrower, it’ll be easy to find a loan if your credit is decent and the RE value is OK…but if you’re trying to pre-arrange loan for unknown buyer, not so easy.
So if you want advice here, I’d suggest you go back and see if you draw a little clearer picture for all of us.
"Has anyone sold a house and taken back a note??
Yes, and Lonnie Scrugg’s book for sale here is all about his system for doing exactly that, on mobiles…but it works exactly the same for any property.
Re: Creating a 2nd - Posted by Sam
Posted by Sam on June 12, 2006 at 15:54:36:
John, I’m familiar with Lonnies 2 books (love them!)
and recognize that “taking back a note” is super common.
Your right, I wasn’t very clear about what I’d like to do. Here goes:
Unlike in Lonnies system, our buyers would have to obtain traditional financing from an institutional lender for the 1st mortgage (80%). We would then finance the last 20% as seller/owner carry.
For clartity, an example:
FMV is 100K. We purchase for 90K. We sell it via traditional methods (i.e. MLS) or L/O it for 111K and carry 20% as owner financing. Our buyer would have to go find a loan for the first 90K.
Make better sense? Possible?
Sam
Re: Creating a 2nd - Posted by Dons
Posted by Dons on June 12, 2006 at 18:00:23:
But Sam,
If FMV is $100K how do you expect to get $111K and still have a buyer get a loan?
Don
Re: Creating a 2nd - Posted by Max-Va
Posted by Max-Va on June 12, 2006 at 17:54:20:
Yes, it is done often. Being in 2nd position the note you carry would have a higher interest rate than the 1st. The only thing it has to be disclosed to the 1st mortgage holder by the buyer. Your note and mortgage or deed of trust would be closed at the closing along with the deed and 1st position mortgage.
Re: Creating a 2nd - Posted by Sam
Posted by Sam on June 12, 2006 at 19:00:27:
Hi Don,
Forgot to mention that after buying it for under FMV, we’ll be putting a little sweat equity into the prop to bring up the value. Also, since we’re creating decent terms for a buyer we should be able to sell for more.
Re: Creating a 2nd - Posted by Sam
Posted by Sam on June 12, 2006 at 19:14:03:
Thanks Max.
The problem I’m having with this is it seems that mortgage lenders/brokers won’t do this without sub-prime financing.
Why, anytime seller tries to carry on a 2nd does it go straight to sub-prime rates? Dooes the buyer have to go sub-prime to get a 1st?
Thanks for your input.
Samantha
Re: Creating a 2nd - Posted by Max-Va
Posted by Max-Va on June 12, 2006 at 22:10:47:
Sub prime is nothing to fear or shy away from.
Sub prime means that it is not a cookie cutter loan, OO, 90%LTV or less with a 680+ score.
Most NOO’s, credit scores below 680, and 95-100% LTV all fall into subprime. Sub prime is where most investors doing conventional loans fall. Yes the rates are slightly higher than a conforming loan. If you think about it most people will refi after 3-5 years or sell in 5-7 years. Sub-Prime is another way of saying Non conforming, which is nothing to be looked down upon.
Re: Creating a 2nd - Posted by Killer Joe
Posted by Killer Joe on June 12, 2006 at 21:00:17:
Sam,
“Why, anytime seller tries to carry on a 2nd does it go straight to sub-prime rates?”
Mostly because the buyer has less ‘skin’ in the deal. The temptation to bail when things go upside down, either with the buyer or the property, tends to be proportional to the amount invested by the buyer. Not the amount the bank and the seller have invested.
KJ
Re: Creating a 2nd - Posted by Sam
Posted by Sam on June 13, 2006 at 24:06:40:
Thanks for shining the light on sub prime loans, Max- Great points here.
Samantha