"No $ For Dwn Pymt- Need To Get Around Bank's Refusal To Classify My Lease-Purchase As A Refi
As a tenant/buyer (t/b), I am about to exercise my option to purchase and I've already been preapproved for a loan of 97% of $140K. This house is valued at a/b $155K. The owner had at least $25K in equity and was straining to make the monthly pymts. So we agreed on a price of $152K. I negotiated this l/o deal whereby I receive 100% rent credit for up to 24 mos. @ $900/mo. (I Know.. It's Rare to Get 100% Rent Credit). She desparately needed to downsize & I needed to Upsize, so we swapped homes. She did a straight lease from me and I lease her larger house with the option to purchase. I'm now in my 20th month, I have $18K in rent credits, and I'm ready to exercise my option. The problem is that I don't have the 3% (or $4-5K for dwnpymt and closing costs. I entered this deal thinking that my rent credits would cover my downpymt and closing costs. And with the house being worth $155K that WOULD be the case IF this were refi, BUT according to the bank (that has already preapproved me), this l/o arrangement doesn't qualify for a refi. My best guess for a solution: Get the owner to agree to execute a land sale contract??? or contract for deed???, let it season for (?) months, and then I'd be qualified for a refi??? Does this make sense or does anyone have any suggestions? Where are ya Option-King?!!
The clock is ticking on me, as my loan MUST close by Mid-October. :-?
The Contract can say anything, but lenders will not allow rental credit to be applied towards the down payment (except for an amount that they deem is above fair market rent). Dump your bank, and go to a mortgage broker. This should be a very smooth close if you've paid with checks and have never paid late.
Yes, Mr. King. I understand that the contract can say anything, but what do you think about the solution I've proposed? Although I paid $250 to the bank to lock-in my interest rate upon pre-approval, (in the Big Scope of things) I don't mind dumping the bank IF I don't have to come out-of-pocket $5K AND I get a rate less/equal to 6.358%. But, more importantly, tell what you think about my proposed solution of executing either a land sale contract or contract for deed.
That would be up to the Seller. The Seller is not obligated to help you in any way and may want to cash out, although with your good credit, owner-financing may not be a bad idea (and then do a simultaneous discounted note purchase). I would first contact mortgage brokers. If you don't like the proposed interest rates, then go the second route, but the note buyers will want a good interest rate as well.
It is my understanding that a tilte *generally* needs a min. of 6 months' seasoning in order to refi.
You would have to ask your bank what their seasoning requirements are. It could be 60 days, a full year, or anything in between.
In my experience as a loan officer, I have rum across several lenders that treat a L/O as a refinance. Depending on your credit and DTI, you may be able to refi at 100% LTV.
~Kesha[ Edited by rajwarrior on Date 09/07/2004 ]
Do what Option-King recommended initially. Dump the bank and to to a mortgage broker. Sure you will lose your $250, but you will probably get what you are looking for. Also, depending on your bank, you may also be able to soften them up by letting them know you are going elsewhere for the loan because they will not do it as a refi.