wrap around mortgage - Posted by leonard9599

Real Estate Investing Real Estate Financing
1

Posted by leonard on September 14, 2004 at 16:50:33:

thank you for the clarification. I understand now. Now i know a little better where to set my standards, so that i can stay on top of my credit, and ability to progress.

thanks again

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wrap around mortgage - Posted by leonard9599

Posted by leonard9599 on September 14, 2004 at 11:34:50:

i am wondering if i write a wrap around mortgage for a buyer how will that look on my credit. Will the lenders for future investments consider that a stable income or will they look at it as something less than valuable.

thanks

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Re: wrap around mortgage - Posted by GMann

Posted by GMann on September 14, 2004 at 12:04:15:

Wrap around mortgages are things of the past. Most present day mortgages have a due on sale clause. Meaning that if the title changes hands the mortgage is callable.

The way they find out is when the insurance and/or tax bill comes in with a different name.

Solution…Lease/purchase, contract for deed or land contract.

The lender will allow you to use 75% of the monthly income to offset the monthly debt service (PITI - principal, interest, taxes and insurance). If you would like your existing mortgage not to be counted towards your liabilities, divide your PITI by .75 and use that # for the minimum rent you will take.

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Re: wrap around mortgage - Posted by leonard9599

Posted by leonard9599 on September 14, 2004 at 14:53:12:

can you explain in more detail, what you mean about the 75%. and how that affects my liabilities. Say for example i am renting the home for 1200, and my monthly piti is 1000, that will look ok to new lenders? I was told that if i had a rental that lenders would look down on the rent as an unreliable source. Are you saying that they do not look down upon it?

thanks

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Re: wrap around mortgage - Posted by GMann

Posted by GMann on September 14, 2004 at 16:14:00:

Generally speaking, lenders allow for 75% of the monthly rental income. It is allowing for a 25% vacancy rate. It is a pretty conservative figure, but it is an mortgage industry standard.

Lenders don’t generally “look down” on borrowers with a few rental properties. When you have > 20 with good credit or >5-10 with bad credit is when you start having some financing issues.

In your case…renting for $1200 and PITI is $1000, you will have $100/month added into your debts.

(1200 rent x .75 = 900)

(900 - 1000 PITI = -100)

Hope it clarifies!