Want to buy my 1st house...Help - Posted by Maurice (So. Ca.)

Posted by JohnBoy on May 03, 1999 at 01:37:43:

Bill Bronchicks course covers this area. I believe it’s “How To Be Your Own Real Estate Lawyer” and/or “Nuts And Bolts Of Real Estate Investing”

You can find it available here on this site. It covers numerous types of transactions and comes with tons of contracts that you can use for just about any type of deals you would ever do. It’s well worth the money!

Want to buy my 1st house…Help - Posted by Maurice (So. Ca.)

Posted by Maurice (So. Ca.) on April 28, 1999 at 13:12:27:

Hello everyone:

Any suggestions would be great…Ok here’s my situation:

My fiance & I want to buy our 1st home to live in. We WERE renting an expensive apartment but are in the process of moving in with family. We plan on doing this for 3 months to save up money & of course to stop paying rent. We want to stay in Corona, Ca. which is a hot market right now. We will also be farming for investment properties at the same time to wholesale flip or assign.

Here’s where advice would be great:

As a rookie I understand that we need to concentrate on flipping to start generating some quick cash. Incidentally I do work full time (6:30am -2:30pm mon-fri) & plan on staying employed & investing part to full time with my fiance’s help.
I am just confused about the best way to purchase our 1st home to live in…We would like:
-a nice 3br/2ba S.F.H. & be able to move in within 2-6 months
-to put down as little as possible, although I’m sure we’ll have at least $5,000 saved up in 2 months
-we would like our payments no more than $1,100 p.i.t.i. (homes we are looking at in that area are around $120,000 - $150,000) & I’m sure we could find a house for below market or one with equity if we were persistent
-we would like to be able to get out at least $20,000 within a short time period, i.e. 1-2 months after closing(either through refi, a second or equity) to pay some bills off.

** But…I have really bad credit & my fiance has marginally bad credit (I just had our credit run)- So we’re holding off the wedding so my credit won’t kill my fiance’s (& yes we are cleaning up both our credit files). I’m sure we wouldn’t qualify to assume an existing loan or to get a first mortgage with decent enough interest. And I know in order to refi or get a second, one of us would need title to the house. I am just a little confused as to how to approach this. I’m sure it’s possible to accomplish this as I know homeowners are getting into homes & immediately getting 2nds. Sorry for being broad, but I’m just looking for some direction to go. I think I’ve confused myself because I’ve been really studying the Carlton Sheets course & this site for creative investing, but since this is going to be my house to live in, I all of a sudden get a brain fart.

Thanks & please be as candid as necessary (I’m sure you will :wink:

Re: Want to buy my 1st house…Help - Posted by Carmen

Posted by Carmen on April 28, 1999 at 18:15:00:

Although I hear what you are saying, that you would like to get your equity out of the house almost immediately, this may not be as easy as you think. First, the refi companies really seem to base their decisions on your credit, and you probably won’t be able to go above 80% LTV without good credit and sufficient income. We have good credit, but since one of us is now self-employed, we still can’t refi over 80% and it’s been over a year - and that’s including the fact that we put down 10% to get in (pre-CRE days), and the comps on the homes sold since are about $20K above what we paid, since we bought a new home.

What I would do is separate my need for a home to live in from getting $20K to pay off my bills. I would concentrate on either a lease-option or finding a home to “take over” subject-to or by assuming a mortgage, as suggested below, for the home I want to live in.

Then I would concentrate on other areas to get my cash, such as flips, rehabs, etc.

At least, that’s what I would do. I would hate to get into a position where now I am the “motivated seller” because I have both an over-financed home and more bills to pay in a few months. Not only that, but your monthly payments would be substantially higher if you do manage to refi/cash out.

PS - whether and when you get married should not be based on your credit. Your credit file is completely separate from your fiance’s - it is possible for one half of a married couple to have rotten credit, and the other half have good credit - but only the person who applies for any particular credit has to show theirs. For instance, I purchased a home with my credit only (we were clearing up an ex-wife’s late payment fiasco off my husband’s at the time). My husband signed the mortgage, but not the note. The house appears only on my credit report. Of course, whomever is applying for credit has to have enough income on their own for whatever credit they ask for, whether it be a gas card or a house.

Go for a lease-option - Posted by Sean(CA)

Posted by Sean(CA) on April 28, 1999 at 14:42:42:

Look through properties for sale to find people that are motivated to sell. Approach them with offers of a lease-option. If you have $5,000 by that time that should easily smooth the way. Find a place that would rent for $1100 and offer them $1100 a month, $1100 security deposit and the balance of the $5000 ($2800) as prepaid rent that will be used up in the second, third and fourth month that you’re in there.

Look for a 3-5 year option, ask for 50% of your rent to be credited towards the purchase price and offer them the full amount they’re asking. If they’re seriously motivated you’ll get a counter-offer.

I know there’s a Carleton Sheets section on lease-options so if you have that review it, and get additional ideas from people here.

Re: Go for a lease-option - Posted by Maurice (So. Ca.)

Posted by Maurice (So. Ca.) on April 28, 1999 at 16:36:44:

I thought about a lease-option, but I want to be able to have the house where we would be able to take out either: any equity in the house or be able to refi & I know that won’t be possible with lease-option (as it would be in the seller’s name still).

After reading an article on “assignments” it gave me an idea: the article suggested finding a home being sold below market by a motivated seller who’s behind on payments & possibly facing foreclosure. The loan would have to be an assumable va or fha before a certain date. You would tie it up with a contract & assign it doing a simultaneous close. Well if I could just catch up the back payments & just assume the loan myself with no qualifying (I have bad credit). Of course the home would have to have equity & be in good shape… I guess I could try & refi. then or get a second. (Remember this is a house I want to live in)

Anyone, please let me know if that would be feasible, possible or dumb.

Thanks everyone & thanks Sean.

Thanks for the Help Everyone - Posted by Maurice (So. Ca.)

Posted by Maurice (So. Ca.) on April 29, 1999 at 09:36:08:

I just wanted to thank everyone for their great input. It’s refreshing to be able to get help like this. I feel a lot more confident on getting my own home now to live in…

Thanks again!

You can refi a L/O - Posted by Jim IL

Posted by Jim IL on April 28, 1999 at 18:22:46:

I have been doing research on this topic for a little while now.
If you check with local mortgage brokers, they should be able to find you a lender who will do a refi on a L/O.

They will use your cancelled checks as proof that you made payments on the home. I was told in my area that this requires at least 6 months worth of payments made on the L/O.

So, if you word your L/O contract correctly, allowing you to excercise your option at anytime during the L/O, then you can refi and take the title in your name, rather than getting a purchase mortgage. Should be cheaper that way. Jhust have the “Seller” carry back a small second for the remainder of the downpayment if you do not have it. And, put in the second that you can pay it off in full with $1000 within a years time after close.
hope this helps,
Jim IL

Assuming - Posted by Sean

Posted by Sean on April 28, 1999 at 18:01:32:

If you’re determined to own a house and have it in your name try just finding someone with no equity that needs to move. Blatantly assume their loan and in 4-6 months the bank will come calling, and you just offer to pay them a point or two to transfer the loan into your name.

They won’t be anxious to foreclose because there’s no equity. As long as you’ve made those payments on time, they’ll deal with you. Timely payments may improve your credit as well. I can’t vouch for your ability to refinance or take out equity.

What exactly is wrong with your credit?

The other alternative to a lease-option is to have the option assignable. Live in the house for awhile then when/if you need cash assign the option to someone else to tap your equity and move on.

Re: Go for a lease-option - Posted by JohnBoy

Posted by JohnBoy on April 28, 1999 at 16:59:25:

You don’t need to limit yourself to non-qualifying assumable loans. You can assume any loan without qualifying by taking it over “subject to”. Find a motivated seller, possibly one that is facing foreclosure if you have some money to make up the back payments to bring the loan current. Then you have the seller just deed the property over to you and take over their loan “subject to”. “Subject to” is where you just take over the payments and the loan remains in the sellers name, but title passes to you. Since the seller is facing foreclosure and going to end up losing the property anyhow, then they should be greatful that you came along to bail them out and have no problem with you just taking over their payments. What would they have to lose? If you keep up the payments then they save their credit from having a foreclosure filed against them. If you default, then they are back where they started from. But if you were to default later on, then they may be in a better position to take the house back from you and start making the payments again themself. So at this point they really have more to gain by letting you save their credit by bringing the loan current and taking over their mortgage.

You need to invest into a course that goes into more details on how to set this up properly.

Assuming a loan “subject to” - Posted by Cheryl

Posted by Cheryl on May 03, 1999 at 01:20:07:

Any ideas on what course to invest in? Assuming a loan, “subject to”, sounds intriguing and I’d like to investigate how to go about it.