newbie stupid question - Posted by Brian K.

Posted by Ed Garcia on June 24, 2001 at 13:31:46:


It would depend on how it affects their debt to income ratio. The loan would still be counted in their debt to income ratio, although it could be off set by showing you as rental income. In most cases the lender will give them 75% credit of the income that you will be paying them as your payment, or market rents of the area, which ever is lower.

Although the property would be sold on a wrap-around, lenders are not great to react to creative financing, because the loan is still in the seller’s name, and the seller is still liable for it.

Ed Garcia

newbie stupid question - Posted by Brian K.

Posted by Brian K. on June 24, 2001 at 02:02:15:

Lets say I am trying to get a seller to keep the loan they have on there house, and let me buy it with a wrap around mortgage, where they are owner financing it. They look to buy another house, won’t that mortgage keep them from getting a new mortgage? won’t the bank say, no thanks, to much risk? I have heard of this happening, please someone explain how this works and forgive me if I am ignorant and stupid.

Re: newbie stupid question - Posted by Kiersten

Posted by Kiersten on June 24, 2001 at 15:20:52:

As Ed said, it will affect their ratio. The other issue is what type of loan they have. If it’s FHA or VA then they can’t get another of the same kind as long as the current one is outstanding. So, they would have to have good credit to qualify for a conventional mortgage. AND having that type of loan as a rental property is a “red flag” to the lender–since both those loans are for primary occupants only. They may be questioned on whether the “primary residence” loan they are applying for will actually end up being a rental–which is a higher risk to the lender. I’ve had this issue a few times (I’m a lender) where an underwriter would only approve an investment loan because they simply didn’t believe it was to be a primary residence. This requires more money down and a higher rate. It’s underwriter’s discretion on this so the loan could be pulled and moved to another underwriter for another opinion to get past this but it can cause problems. There are issues but there are ways around them depending on the seller’s individual situation.

Re: newbie stupid question - Posted by Travis (Dallas)

Posted by Travis (Dallas) on June 24, 2001 at 11:58:11:

It all depends on their credit, etc.
It would be similar to them owning a rental property & also owning their personal home. If you are going to occupy the property, it would probably cause them less problems than a rental property. I would suggest that you call a local mortage company & get their opinion.
I’m not in the mortgage business.
Good luck.

please someone…ed garcia??? anybody - Posted by Brian K

Posted by Brian K on June 24, 2001 at 11:30:45:

please help