This material is way over the head of 99% of agents and very risky to do if you don't do it exactly right. I suggest some specialty training such as Ron Legrand and others who know how to do LO, SLO, and Sub 2 and Sub 3 deals. You also need a good attorney and accountant who understands and works with investors. Taxes will eat you up if you don't have the right entity, and you need to understand how to avoid being classified as a Dealer instead of an Investor for tax purposes.
The money is there, but a lot of knowledge is required.
When buyers cannot qualify for a traditional mortgage, some often turn to Hard Money Lenders. Caution should be used there though. Many of those types or loans come with a much larger down payment requirement, significantly higher interest rates, and term only for a short period of time. A huge issue then arises if you are still not able to qualify for a traditional mortgage once that term has reached its maturity. You could be out your investment if you are not very careful.
The same can be said for lease purchases. I do not suggest doing lease purchases for a variety of reasons. There are simply way too many things that can go wrong with one from either side.
In order to do true owner financing, the owner must own the property free and clear of any mortgages. Very few sellers are going to be in that position.
If the property currently has a mortgage on it, the owner cannot legally transfer the title to a buyer without the mortgage first being paid in full. Most all mortgage loans have a due on sale clause. This due on sale clause requires that the mortgage be paid in full should a title transfer occur.
The buyer is also at great risk on a lease purchase transaction should the seller quit making their mortgage payments. Right now, many sellers cannot afford to make their mortgage payments or simply chose not to continue making them. I have seen where the buyer is making their rent payment, but then the owner is not paying the mortgage. The next thing the buyer knows is that the home is in foreclosure. That means the buyer will generally not get back any of the money they have given as earnest money or security deposits.
It is also a big risk on the buyer. If your credit is not where it needs to be now, there is no possible way of you knowing it will be acceptable in a set amount of time.
Before entering into any type of agreement like that, the buyer needs to make sure that they fully understand the potential pitfalls that could arise. Should the seller default on the mortgage, the buyer could lose ALL of the money that they have invested. Until you are able to purchase, renting is generally the safer option.
Working with a knowledgeable and seasoned loan officer is critical in today's market. Getting Pre-Qualified is the only way for you to find out it traditional financing would be an option for you. To get Pre-Qualified for your purchase, you can submit your request online at http://www.rodneymason.com.
Rodney Mason, NMLS #151088
Sr Loan Officer
825 Juniper St NE, Atlanta, GA 30308
Office: (404) 591-2453
Apply Online at http://www.rodneymason.com
Licensed in Alabama & Georgia with over a decade of lending experience.
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