Forgiving The Note
I am interested in purchasing a property that I only qualify 85% LTV. The owner is willing to carry back the second with a forgiving clause to be exercised after 6 months. Can this be done? If I understand correctly that means he will forgive the 15% after 6 months. Great for me but what is his benefit?
Thanks.
that is called loan fraud, I believe. Anyone else?
I thought that as well, but the house is actually worth more than our purchase price. Comps are coming in about $10,000 higher. He's selling because he is moving out of the country. and said he doesn't want to deal with collecting payments.
I agree with Dave, I know a lot of people do this, but not with my name on the paper work. I see alot of people with your problem. You need to tell your lender or broker to find a bank that will allow unlimited seller credit. This is legal and is doesn't require any phony seconds.
Lori
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The fraud aspect revolves around agreeing to forgive the note prior to borrowing from the lender in 1st position. If you are creating such a structure so you can avoid coming up with the down payment then you have fraud. If you are just creating a 1st with 2nd purchase and then later the 2nd is restructured, discounted or otherwise changed with no prior intent to defraud the lender in 1st they it is not fraud.
The problem is it is very hard to draw that line in the sand and most lenders will want to see a cash down payment in any case.
John
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