Posted by Les Gee on May 22, 2001 at 14:27:15:
I stand correct. Jim is right and expanding you can do this on a A Jumbo product as well if you hunt around.
Creative Financing Or Fraud? - Posted by Garth
Posted by Garth on May 21, 2001 at 17:16:15:
Scenario: Judge as fraud or just creative financing
Owner selling for 125k, investment property, owner does not live there.
Owner gives deed to buyer. New buyer gives owner note which for difference between 125k and existing mortgage. New buyer refi property(assume new buyer can only get 75% of property value as max refi or maybe not you tell me). This refi at 75% happens to cover old existing mortgage balance and 2nd note given to old owner. This appears to avoid new buyer problem of no cash for down payment. Can this work say like a double closing or does this need to be seasoned?
Experts please chime in here.
Thanks.
Re: Creative Financing Or Fraud? - Posted by Les Gee
Posted by Les Gee on May 22, 2001 at 01:03:31:
Neither! Actually don’t think it will work. When the buyer refis at 75% the A lenders will only loan based on the lower of appraised or sales price for the first yr. BTW most A lenders will go to 90%, of course you have to pay pmi or some add on’s.
Double closing? Why pay two transfer taxes and escrows. Again, as it is written you will have to come up with cash. This is not creative at all. You are missing something.
Re: Creative Financing Or Fraud? - Posted by Garth
Posted by Garth on May 22, 2001 at 08:32:49:
Thanks Jim and Les for your comments.
The owner wants to sell property quickly. He accepted price which I believe is 25% under market value. It is multifamily and already rented owner not living there.
I don’t have down payment or closing cost. I thought he transfers deed to me if takes back a note for his asking price which is 25% below market, I could then refi, I believe since I will not live there I can only get 75% of market value max. I would still need to qualify but that’s all I would not need any down payment money but there might be closing costs. I hoped all in one closing I could get the deed from the owner then immediately refi and pay off the note I had with the original owner. My expenses are only closing costs. I would not need any seasoning. I don’t think there would even be any pmi. Is this correct? will this only work with conventional and or fha?
Re: Creative Financing Or Fraud? - Posted by Jim Upchurch
Posted by Jim Upchurch on May 22, 2001 at 08:14:11:
If you qualify for a conventional loan (FNMA or FHLMC) there is no longer a seasoning issue. The lender will base the new “refi” loan on the appraised value one day after closing.
Good Luck…
Jim Upchurch
Re: Creative Financing Or Fraud? - Posted by Jim Upchurch
Posted by Jim Upchurch on May 22, 2001 at 11:49:05:
If you have that much equity - purchase the property “on paper” for full market value, get a 75-80% loan and a 20-25% gift from a non-profit downpaymant assistance company.
Please read the following. This was in response to a post made a few weeks ago.
Good Luck…
***************** previous post ****************
There is a way to do this deal honestly with no money down.
The home appraised for $240,000 but the seller only needs $175,000. You are correct; most all lenders base the LTV off the lower of the appraised value or the sales price. (on a purchase)
My proposal is for you to purchase the property for $240,000 (on paper) with the seller paying your closing costs up to $2,600. Knowing the seller needs to “net” $175,000, obtain an 75% loan (based on the sales price of $240,000) in the amount of $180,000.
For the remaining 20% or $ 60,000 use a ?gift? from a non-profit down payment assistance company instead of a ?fake? seller second that would be torn up after closing and is highly illegal.
At closing, the down payment assistance company would wire the $60,000 to the closing agent from an existing pool of funds. On the HUD-1, the closing agent would show the down payment as a credit for the borrowers. In addition, the HUD-1 would reflect a debit from the sellers funds for a donation to the down payment assistance company, to replenish the funds for future borrowers, in the amount of $62,400, original $60,000 plus 1% ($2,400) of the sales price as a fee.
The seller would “net” $175,000 at closing. ($240,000 sales price - $62,400 to non-profit - $2,600 closing costs = $175,000)
The buyer ends up with 100% financing and it is 100% legal.
I am a mortgage broker and have financed several owner occupied loans this year using this scenario. In addition, I talked to an underwriter at GE and they stated, at 80% LTV, this will work on investment property as well.
Please email me if I can help.
Good luck…
Jim Upchurch
Re: Creative Financing Or Fraud? - Posted by Les Gee
Posted by Les Gee on May 22, 2001 at 12:09:16:
Jim writes: If you qualify for a conventional loan (FNMA or FHLMC) there is no longer a seasoning issue. The lender will base the new “refi” loan on the appraised value one day after closing.
Les replies: I respectfully disagree if we understand each other.
Ex: You purchased a $500,000 house for $300,000. Before one year has transpired try getting an “A” product loan for say $350,000 loan amount and you will find it difficult. Time to get a non-A product.
Re: Creative Financing Or Fraud? - Posted by Joaquin
Posted by Joaquin on November 28, 2001 at 13:50:50:
Hi Jim, Firstable I am a newbie and I am trying to understand this as much as possible so I can buy some property. My question is, on your scenario above, does the buyer has to pay taxes on the donated downpayment of $62,400? and where/how to setup the non-profit down payment assistance company? thanks…
Re: Creative Financing Or Fraud? - Posted by Les Gee
Posted by Les Gee on May 22, 2001 at 12:13:36:
Les replies: Now this one I respectfully agree. Good luck.
Re: Creative Financing Or Fraud? - Posted by Jim Upchurch
Posted by Jim Upchurch on May 22, 2001 at 13:42:16:
Les -
“I respectfully disagree with your disagreement”
…All kidding aside…
I am looking at my “Freddie Mac Refinance Comparison Chart” and it states there is no seasoning required on an existing first mortgage. This information is also in Section 24.5 and 24.6 of the Freddie Mac Seller/Servicer Guide.
In addition, I have closed several cash-out refinance loans for an investor who purchases the homes from HUD with loans form a local bank (they limit him to 4 loans) and I do a cash-out refinance, based on appraised value, to pay off the local bank, pay closing costs and put a few thousand bucks in his pocket. He then rents the properties out for additional monthly income.
Please feel free to email me if you have any questions.
Sincerely,
Jim Upchurch
jim_upchurch@hotmail.com
Re: Creative Financing Or Fraud? - Posted by Jim Upchurch
Posted by Jim Upchurch on December 04, 2001 at 09:51:10:
Joaquin -
It was fun while it lasted. Lenders are no longer allowing the above referenced scenario on non-owner occupied properties. They DO still allow it on owner occupied properties.
Good luck?
JIM