How Does The Status Of A Lease/purchase Qualify As A Refinance
Why are lenders allowed to finance a lease/purchase-option tenant/buyer (AFTER a 12 month lease) with the more favorable Refinance loan as opposed an Original Loan. I already understand the LTV benefits of a refi vs. the absence of that LTV benefit in when obtaining an orginal loan. Is it because the [12 or more month] T/B is considered to have a legal interest in the property?
[ Edited by dcdriver on Date 08/08/2004 ][ Edited by dcdriver on Date 08/08/2004 ]
Beats me as to why, but not all will treat it as a refi. You have to deal with those lenders who do.
Why only get 35 percent when you can get 100 percent? Is it a good deal for most Sellers? Sure. Is it a good deal for You? Since you are here and are sort of one of us, then no it isn't. This is a Cooperative Agreement, and it is only as good as the person you sign it with. Normally, a valid Lease Purchase will release 75 percent of your income-to-debt-ratio. Yes, a landlord policy is higher. Yes, this is risky. I don't want to hurt the investors out there doing this sort of thing--but my suggestion to you would be to learn how and L/O it yourself.
I agree I am a realtor in northern colorado specializing in putting deals together for investors, First your taking all the risk by having the loan in your name alone so why not recieve all the profit/appreciation, sell the home yourself as a lease option and cut them out of the picture. I have seen many so called "investors" walk on deals they put together leaving someone else holding the bag, some of which now have the DA investigating them. If you continue with these people do your research and make sure they are legit and experienced.
Thanks!!
I take more risks in that I have to pay for repairs and during times when it is unoccupied. Does not the co-op reduce my risk some?
One problem with this idea is that the reason we are selling is we are planning to move back east (no strict timelines, so we are very flexible there).
How would I manage finding tenants or repairs for the house and what happens if the tenants wreck the place? Would I use a property management company? Seems that would cut into my profits substantially.
Also it seems that by attempting this on my own (although you guys are tempting me :>
TIA
No, it doesn't decrease your risks. Your coop investor is going to make the T/B do all minor repairs (just as you would). If you collect 5 percent down from a serious T/B, wrecking the property isn't common. If you have a friend who can ride by occasionally, you can do this as an absentee owner.
Ok thanks again, but one more set of questions.
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What happens if I loose the tenant? How hard is it to find a tenant as an absentee owner?
Also where would be a good place to start learning the ins and outs of L/O (I like books :>
Tia, try Barnes & Noble and Half Price Books.......great reading, and great reading places...... :-D
Thanks myfrogger for the great summary that helped allot.
A quick question on the 75% DTI ratio that you and leaseoptionking mention, so at this point I still have a mrtg payment counting as debt and I have a rent income, are you saying that only 75% of the rent counts towards my income while the full mortgage payment still counts as debt?
Or is only 75% of the ratio of rent to mortgage payment counted towards my DTI ratio? I am little confused as to how that works.
Yeah I am especially worried about trying to do this at such a long distance (east coast to CO) so I am leaning towards the investor option especially since I don't really have any friends I can ask to drive by :>
Thanks again.
No, 75 percent of the mortgage debt will be released off your income-to-debt ratio when figuring your credit score by your lender once they see a copy of the paperwork, in specific for borrowing more money from that lender. Ironic, since both the L/O and Agreement for Deed technically call the Due on Sale.
LeaseOptionKing,
Sorry a little slow on the uptake :>
So if my mtg is $1200.00/month and I am renting for $1400.00/month how would the #'s work?
From what you are saying 75% gets released, so $400.00/month still counts as debt per month correct? Would I then also get to count the $200.00/month rent income?
Or is it because its a L/O I get to count the 1400.00/month as income while only $400.00/month counts as debt.
Sorry again, very new to this but TIA
It's $300 that still counts as debt. Depends on the lender as to how they count the rent. It could be additional income, yet many lenders don't really like rental income unless multi-units or commercial.