Getting mortgage on short length of title?

[cfc]

My first question posted on this site. :SM101:

I have a buyer for a rehab I completed, but the problem is that they are having trouble finding a lender that will give them a mortgage. Here are the facts:

Buyer's info: stated income, 570 credit score, about $5K in savings
House Info: Bought for $95K w/ hard money three months ago, put in $15K in rehab (also from hard money) and selling for $145K, but listing on contract as $156K and seller to come up with 90% cash.

Two questions:
1. What's the best way for the buyer to finance this house? I need the cash, so I do not want to carry anything on it. The mortgage brokers I've spoken to say mortgage companies usually want 1 year on title, or if it's shorter, the buyer has to have A+ credit which my buyer doesn't. The best I can come up with is a company that will do 570/stated at 85% LTV with 3 months on title. I'm currently renting to them for $1200/mo., but that doesn't even cover the interest on the hard money loan. Any thoughts?

2. My broker said he is not sure about the way the contract is written. It says the sale price is $156K, the mortgage is 90%, and the buyer will come up with the rest, meaning, the buyer only needs to come up with the amount that will bring the total to $145K, the price I'm asking for the house. This is how their mortgage broker wrote up the contract, so I went along with it, but I'm not so sure this will fly at closing.

I appreciate any thoughts, and I really appreciate finding a place where one doesn't have to spend $100s or $Ks to get some help. I think I could have bought another house or two with the money I've spent on membership fees and courses. :praise:

Thanks in advance,
Joe

[mcole]

Greetings Joe,

I’m sure there are other folks on this site that can offer some excellent advice. But I had a couple of thoughts on this.

First, there ARE lenders that don’t require title seasoning, and who will go with lower FICO scores and stated income (even on NOO). But every situation is different, depending on other criteria.

In this case, if I’m understanding correctly, the buyer would probably have to go stated income and stated assets, or some sort of NINA or No Doc program – as they have no way to verify where their money is coming from.

Also, even though you’re only wanting $145K, but showing the sales price at $156K, the $11,000 difference has to be accounted for somehow on the HUD1. And the lenders are going to want to see it.

One way might be for you to do a cash-out REFI yourself, and put them in on a CFD or L/O. It would allow you to pull some cash, and possibly still realize a positive cash flow for the term of the contract.

Another way might be for you to go ahead and carry a note, but discount and sell it through escrow to get your cash out now. It would help the LTV for your buyers, but the CLTV would still be the same and they would still have to qualify for a new loan.

These are just a couple of ideas I had. But hopefully, other will come up with something better.

HTH

[cfc]

HTH,

Thanks for the reply. I think you confirmed some things that I was thinking but was not sure about. YOu're right that the HUD1 is going to show the contract price and be looking for the $11K plus downpayment and closing costs. I know that I can give back 3% in closing costs, but the rest of the cash has got to come from somewhere. I was thinking that I could come up with it myself at closing, then get it right back from the proceeds of the sale. What do you think?

I was trying to avoid a refi. and doing a longer term lease, but it might be my only option. I already have the buyer leasing for three months, but I'm neg. cash flow on it b/c of my hard money loan. In the end, I'd only be losing a few $K, but it might be the only option if we cannot find a lender that will do at least a 90% LTV stated doc/assets.

Thanks again for your thoughts!
Joe

[David Leach]

Hi Joe,

Your situation sounds difficult, but not impossible.

The title issue shouldn't really matter with the improvements you've made. If a lender has any questions about it, you may have to document the improvements.

Some of the LTV restrictions could be beacuse of the reasons the score is 570 and not the score itself. Do they have a BK or repo in their credit? This can have a bearing. However, there are still lenders who will go 100% stated if they have a steady job. I have a lender in my portfolio who might entertain this one. Let me know if you want to look into it.

Your idea about providing your own down payment might work with some lenders. You have to find one who doesn't require the downpayment to be seasoned. It will have to show coming our of your buyers account, so there could be some risk there, but it can work.

However, $11,000 doesn't equal 10% down, so you still might have a problem if you can't get a loan for an LTV that high.

David

[DionEvalueMortgage]

I agree with David difficult not impossible. The title thing not that big of a deal. Your math is not correct with the $156,000 sale price. 10% of that is $15,600 making the loan amount $140,400. Concessions at 3% are $4,212 some lenders may allow up to 6% or $8,424. Which mean you would have to inflate the sale price accordingly or you loose that money. Thus one crucial componet missing is how much money do you want to walk away with?

So the borrower (buyer) needs to show $15,600 as his. You could deposit this money into his account and then have him draft it into a cerified check from the bank and take it to close. This also depends on the seasoning requirement from the lender and let's not overlook the possible requirment for 3 to six months PITI.

This might kill this deal. :SM105:

[cfc]

Thanks for the tips David. the reason the buyer is doing no doc is b/c they are self-employed. No BK or repos though. I don't think they fit your profile b/c of the self-employment, but thanks for the offer. BTW, are they lisenced in Texas? They could be a great resource for the future.

Joe

Hi Joe,

Some of the LTV restrictions could be beacuse of the reasons the score is 570 and not the score itself. Do they have a BK or repo in their credit? This can have a bearing. However, there are still lenders who will go 100% stated if they have a steady job. I have a lender in my portfolio who might entertain this one. Let me know if you want to look into it.

David

[cfc]

I had posted a long reply to this, but I think did something to erase it and therefore have to reply again. The summary is that I think you're right. I'm looking to get $145K cash from the buyer. I think they do have a problem with the 3-6 mo. PITI seasoning, so if their current underwriting doesn't work out, I may have no choice but to lease it to them for a year and then sell.

I'll chalk this one up as a learning experience and do better in qualifying the buyer next time.

Thanks again for the reply! I'm learning lots!
Joe

I agree with David difficult not impossible. The title thing not that big of a deal. Your math is not correct with the $156,000 sale price. 10% of that is $15,600 making the loan amount $140,400. Concessions at 3% are $4,212 some lenders may allow up to 6% or $8,424. Which mean you would have to inflate the sale price accordingly or you loose that money. Thus one crucial componet missing is how much money do you want to walk away with?

So the borrower (buyer) needs to show $15,600 as his. You could deposit this money into his account and then have him draft it into a cerified check from the bank and take it to close. This also depends on the seasoning requirement from the lender and let's not overlook the possible requirment for 3 to six months PITI.

This might kill this deal. :SM105:

[David Leach]

Thanks for the tips David. the reason the buyer is doing no doc is b/c they are self-employed. No BK or repos though. I don't think they fit your profile b/c of the self-employment, but thanks for the offer. BTW, are they lisenced in Texas? They could be a great resource for the future.

Joe

Joe,

When I mentioned a steady job, it doesn't have to be W-2. Self-employed folks can have steady employment. That's what I meant by that. Sorry for not being clear.

Yes, I can get that money in TX. Let me know.

David

[Dan Auito]

Joe you may have fell victom to the long delay effect of writing a detailed reply to a post. Sometimes if the page open is left idle, when you finally get ready to post up your masterpiece, microsoft comes up with a big fat error for you and you lose the work.

If you are creating a detailed post, take it over to word and temporarily save it to your docs file while you ensure it posts properly, this will save you from wanting to throw the whole computer out the nearest window. :cussing: :SM061: :SM144:

[cfc]

Thanks for the help everyone.

David, I'l let you know if the buyer's financing doesn't go through. I don't know about their history with the self-employment, so I'll have to ask if we get to that point.

Dan, I'll keep that in mind whenver I have too much to say and I'm typing below my usual 200wpm! :icon_redf

Thanks again everyone. I'll let you know if anything changes.
Joe

[BCC]

Maybe someone can clear this up for me:
I've been told by 2 different buyers that their lender wouldn't approve their purchase of an investment house I have because in Georgia 12 months seasoning is required by law. Is that the case or is it just the policy of some lenders? I can't imagine that a state law would be that restrictive. People buy houses and get relocated in less than a year all the time. I was once transferred in under a year - but that was quite some time ago.
Bernard

[Dan Auito]

Bernard give these two folks a call and get it straight from the horses mouth, they will be able to answer this with certainty! Please come back and tell us what they had to say.
These two are my favorites because they
(1) return calls better than most
(2) have a wide range of programs for investors, and
(3) are competitive with rates and origination fees.

Josh Carr
AmTrust Mortgage
770-925-0970

Christi Azurmendi
First Mortgage Solutions
678-420-1305

FYI - First Mortgage is locked into using one certain appraiser (DS Murphey, a good company).

[Aldo]

One year's seasoning is the generally accepted rule of thumb. Most, but not all, banks adhere to that.