Posted on: 07th Sep, 2009 07:35 pm
I am a real estate investor, and am selling my first rehab now. It is not easy to find first time buyers who qualify for FHA loans. Many need a period of time for credit repair, job seasoning, saving for closing costs and down payment, etc. I had some advice to give these folks a first mortgage- short term balloon, and let them refi in 6 mos or so. Apparently, the out of control downward spiraling appraisal situation will not be affecting the new owners in such a negative way then, as it threatens to do now. Also, a history of on-time payments will ad to the loan worthiness of the applicant.
What do you think? Can you list the pro's and con's to me, as the "banker", and also for the new buyers?
What do you think? Can you list the pro's and con's to me, as the "banker", and also for the new buyers?
to refinance a mortgage, if there is sufficient equity in the property. the equity can "in essence" be used as the down payment. but, 6 months "seasoning" may not be enough in this market on a flip.
i would approach it carefully, and have the buyer line up some good refinance options early in the process before signing the contract.
also, keep in mind that mortgage programs are still tightening and what is here today may not be here tomorrow.
best of luck!
i would approach it carefully, and have the buyer line up some good refinance options early in the process before signing the contract.
also, keep in mind that mortgage programs are still tightening and what is here today may not be here tomorrow.
best of luck!
Good points about the equity in this market- 6-12 mos from now, we could have had a loss of equity, not a gain. Also, mortgage programs are constantly changing and so it becomes a gamble to depend on current products for the future. But- if the key to selling your investment home quickly is "seller financing," and I do not want to hold mortgage paper any longer than I have to but would like to give the buyer a little assist in arriving at the destination- ie a bank loan- what are my options? We investors are being told that, until more people can qualify, our success depends on the Seller "being the bank."
As far as I know, a borrower will not be able to refinance the mortgage within 6 months. The borrower will have to wait for at least a year in order to refinance the property. However, it is true that if the borrowers pay their mortgage payments on time, it will add to their credit report. Their credit score will get improved.
seller-held mortgages are not going to show up on a credit report; hence there's no benefit to a buyer from a credit standpoint. a seller/lender can vouch for the payment history, which a lender can take into account, but it still won't impact a credit score.
and i agree that 6 months is insufficient time for someone to run in and refinance. the market hasn't turned around everywhere, so there will still be signs of declining values, which will also hamper a refinance request.
as a seller, i'd be inclined to think, you will need to be prepared to hold that paper for a year or more.
and i agree that 6 months is insufficient time for someone to run in and refinance. the market hasn't turned around everywhere, so there will still be signs of declining values, which will also hamper a refinance request.
as a seller, i'd be inclined to think, you will need to be prepared to hold that paper for a year or more.
