Funding Closing Cost - Posted by HT

Posted by Rita_mo on March 13, 2000 at 21:43:59:

ditto with chris, Ive never had a title company object to seller paying closing, at closing they just talley it up on the settlement sheet to the seller and deduct from the amount.

Funding Closing Cost - Posted by HT

Posted by HT on March 13, 2000 at 15:01:58:

What is the best way to provide all closing cost to a tenant on an l/o without running into any problems?

I’ve read about gifts, sweat equity, going through “fake” 3rd parties, etc…, but there always appears to be someone (I’m not sure which governing body, title co, etc…) that has a problem with this. What’s the problem if I want to give my hard-earned money to someone to pay closing cost to get into a home? Isn’t this the supposed “American Dream?”

This tenant has questionable (more towards bad) credit and I want to ensure that I move this property at the end of the lease term.

I know I can hold the financing, but I would have to jack up the price too high above market to acquire a note broker and leave myself a decent profit. I purchased at about 74% LTV.

If I leave everything as is and complete the sale, I will bring home a nice profit on the tail-end. I’m not being greedy, I’m just attempting to recover on this property that a RE agent screwed me into acquiring.

NOTICE TO ALL NEWBIES: Go with FSBO’s as much as possible, especially in the beginning. There are some good realtors out there, but there are also plenty who will take advantage of your lack of knowledge just to get their commissions.

Any suggestions would be greatly appreciated.

Re: Funding Closing Cost - Posted by GIO

Posted by GIO on March 14, 2000 at 21:26:19:

on most of my deals (FHA loans), i pay all the closing costs upto 6% assuming prop still appraises (FHA allows this - banks dont dispute this), conventional loans only allow 3% sellers concession(another way of saying owner pays something towards assisting purchaser),
re: down payment - buyer can do work on the property and you pay them for the work and have the money given right back to you simultaneously , Jsut an idea -buy their car and use this as down pymt - i’m curreently working on something like this - deal may not fly anyway since credit is horrendous, but theres more than one way to skin a cat - GOOD LUCK

Re: Funding Closing Cost - Posted by Joe Gtz.

Posted by Joe Gtz. on March 14, 2000 at 17:36:30:

"Ditto"
I would like to do business with that realtor on my first real estate buy!!!

Re: Funding Closing Cost - Posted by Troy M

Posted by Troy M on March 13, 2000 at 21:23:39:

Hello HT,
I’m just curious. Who told you there was anything wrong with you paying closing costs? In my experience, lenders don’t care who pays closing costs. But, they DO care who pays the down payment. If I’m missing something, please let me know.

?

Troy M

Re: Funding Closing Cost - Posted by chris

Posted by chris on March 13, 2000 at 19:25:49:

The Nehemiah program might be useful. I don’t remember all of the details so here is their link where they have a FAQ section. Check also with your city/county housing and community development departments for first time homebuyers programs. A check with your state housing finance agency may also be beneficial.

http://www.nehemiahprogram.org/home.html

-Chris

Re: Funding Closing Cost - Posted by Bud Branstetter

Posted by Bud Branstetter on March 13, 2000 at 19:03:55:

Your lease payment is paid at the beginning of the month. The interest payment is at the end of the month in which they purchase. They will have one months payment that they can dedicate to closing costs.

Help them now by taking a 1003 to a mortgage broker to see what needs to be done. Make sure payments to you are on time and documented. Make sure they call you ahead of time if they don’t think they can pay on time. Maybe a FRIEND will loan then money till payday. There are mortgage programs where the owner can gift them equity.

Re: Funding Closing Cost - Posted by chris

Posted by chris on March 13, 2000 at 16:31:01:

How about something along the lines of “seller(optionor) to pay all non-recurring closing costs.”

Re: Funding Closing Cost - Posted by Ed Copp (OH)

Posted by Ed Copp (OH) on March 13, 2000 at 15:58:21:

You purchased at 74% of value, and the Realtor screwed you. Just what would you call a good deal? …ED

Re: Funding Closing Cost - Posted by HT

Posted by HT on March 14, 2000 at 10:16:09:

Troy,

Thanks for the feedback from you and all the other respondents.

It’s possible my info was incorrect. If so, do you have any suggestion on how to avoid problems with the down payment issue?

Also, why do they care where the down payment comes from? I still have the same viewpoint with that as with the closing cost. It’s my money and if I want to give it to a potential buyer, why should they be concerned?

Re: Funding Closing Cost - Posted by HT

Posted by HT on March 13, 2000 at 16:39:58:

Thanks for the suggestion. Would you mind elaborating on this clause?

Re: Funding Closing Cost - Posted by Troy M

Posted by Troy M on March 14, 2000 at 19:55:35:

HT,
Banks/Lenders look at loans the same way we look at investments. They assess the risks and try to protect themselves from those risks while trying to make a profit, just like you or I should. So, they use all of those statistics, ratios, numbers, etc. to help them evaluate the risk, and the statistics tell them that buyers who have very little of their own money in a real estate deal are more likely to just walk away if they run into trouble making those monthly payments. It’s that simple, and I can’t really blame them, they’re here to make a profit just like we are. That’s not to say your buyer can’t get the loan you’re looking for just because whoever you tried first wouldn’t do it. Like investors, some are more aggressive thatn others. You might try posting the numbers here, I’d bet you get some sound advice on how to get your tenant/buyer to cash you out.

Good Luck,

Troy M

On L/O you can refinance. - Posted by MDonovan FL

Posted by MDonovan FL on March 14, 2000 at 15:43:55:

If you keep copies of the rental checks, it will serve as documentation to establish credit. The lender will be able to do a “refinance” loan after they have a year history of on time payments to you. They will roll all closing costs into the loan. Ask any mortgage broker how to do this.

The reason lenders want to see the borrower put down cash is so they have a vested interest. If its your cash, they are more likely to default. By the same token, a lender will not refinance with cash out until you have been paying for a year on the purchase mortgages. The reason is the same – they are afraid you will take the cash and walk away.

So a year’s worth of L/O payments to you equates to a one year seasoning in their mind. They may even do a cash out finance if the equity is there.

You will have a problem if you try to take this to a commercial bank, so use a broker. And get one now so you and your T/B can jump through all the right hoops.

Re: Funding Closing Cost - Posted by chris

Posted by chris on March 13, 2000 at 18:52:24:

HT-

Non-Recurring Closing Costs are items such as appraisal,
credit report, processing fees, origination fees, transfer taxes,
points, etc., which are paid on a one-time basis.
Recurring Closing Costs (also known as pre-paids) include such
items as property taxes, hazard insurance and may include
pre-paid interest or Private Mortgage Insurance premiums.
Total costs and the method by which they are split between the
buyer and seller depend upon local custom, jurisdiction and
agreements stipulated in the purchase contract.

-Chris