Advice needed
Question: I have offered to buy my sister’s home on contract this summer. We have a few questions, though, and would appreciate any advice.
1. How will this affect their existing mortage? 2. How will this affect their buying power?
I had to declare bankruptcy last August and there’s no way I could qualify for traditional financing right now. Our plan is to have me refinance it in Sept of 2007 (when the BK should no longer affect my borrowing power) and pay them the balance + their equity then.
Thanks in advance – please advise!
Answer: The house has to be free and clear before they can sell it to you. A contract for deed would be meaningless since they cannot give you a valid deed given the mortgage on the property. And when they move out and you move in, the loan is mostly likely callable since the loan was most likely for an owner-occupied house.
If you think that 2 years is going to be enough to clear up a bankruptcy from your credit history, then you are really optimistic. I’d expect that you will be paying about twice the interest rate as any human with good credit.
What is the hurry? Why not take advantage of the great rental market right now until you can clear up your financial mess and save up some down-payment? You could do that with a personal contract, but I suspect the best way is to transfer the title into a land trust and write a contract to change you ro the beneficiary of the trust once you’ve paid off the personal contract. Then you make the payments in a wrap-around and at some point you’ll build up enough equity and credit rating that you can refinance the whole thing cleanly.
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