wtm@ihuxb.UUCP (Bill Matern) (05/07/84)
Is it legal to do the following when buying a house. The buyer and seller agree at a price of $50,000 (for instance). The buyer needs to come up with 10,000 for down payment/points/etc. but only has 5,000. Can the seller give(lend or whatever you want to call it) the buyer 5,000 to meet the down payment and sell the house for 55,000?? The mortgage would be higher but the buyer can get the house with out a lot of down payment money. (the seller would recoupe the 5,000 when the buyer would get the loan.) Is this legal and if so what problems can crop up?? Bill Matern (In search of a house) ihnp4!ihuxb!wtm
wetcw@pyuxa.UUCP (T C Wheeler) (05/08/84)
[] It sure is legal. It's done all the time. Go to it.
stanwyck@ihuxr.UUCP (Don Stanwyck) (05/08/84)
The case you give is legal, as far as I know. While I am not a lawyer, I do deal quite a bit with real estate. The practice described is actually quite common. Another similar practice is the use of owner-financing of the difference. Suppose that you agree that the house is worth $50,000. Then, you make an offer of $55,000, contingent on the owner financing some part of it (frequently all of the difference between your first mortgage and the sales price), preferably at a favorable interest rate. This can get you into a house without a down payment. (the traditional amount to raise the offer is to 110% of the agreed "real value" of the house) Another technique (related) used by V.A. qualified buyers, when a home owner is not willing to sell V.A. and pay the points, is to jack up the offer by enough to cover the points. This way the buyer is really paying the points, but needn't put any cash out to do so. And, for most owner-occupied houses, V.A. will finance 100% of the sale price, leaving the buyer only responsible for his/her share of the closing costs. There are many more imaginitive, legal, even occasionally ethical, ways to finance a house. Consult your local realtor for the latest in your area. -- ________ ( ) Don Stanwyck @( o o )@ 312-979-3062 ( || ) Cornet-367-3062 ( \__/ ) ihnp4!ihuxr!stanwyck (______) Bell Labs @ Naperville, IL
robison@eosp1.UUCP (Tobias D. Robison) (05/08/84)
References: I'm commenting on the question of whether it is OK for the seller of a home to lend the buyer part of the money he needs for a downpayment, to get a mortgage. This is specualtion; I'm a homeowner, not a lawyer... I think you must disclose, to the organization that will provide your mortgage, the terms of other significant loans outstanding. The terms of the seller's loan make a big difference. If it is entirely unsecured (very unlikely), it might not bother the prospective mortgagee at all. If it is secured using the house as collateral, you may not get your mortgage. If it is in effect a second mortgage, the price of your first mortgage may go up. - Toby Robison (not Robinson!) allegra!eosp1!robison decvax!ittvax!eosp1!robison princeton!eosp1!robison
ken@ihuxq.UUCP (ken perlow) (05/15/84)
-- >> Is it legal to do the following when buying a house. >> The buyer and seller agree at a price of $50,000 (for instance). >> The buyer needs to come up with 10,000 for down payment/points/etc. >> but only has 5,000. Can the seller give(lend or whatever you want to >> call it) the buyer 5,000 to meet the down payment and sell the house >> for 55,000?? The mortgage would be higher but the buyer can get the >> house with out a lot of down payment money. (the seller would recoupe >> the 5,000 when the buyer would get the loan.) Is this legal and if >> so what problems can crop up?? The problem is getting financing. When you get a mortgage, most banks require you to tell them whether you will borrow any of your down payment. Your answer, unless you are worth millions, only just now happen to be, ah, a little cash-short, will probably make a big difference in their answer. Also, the seller doesn't see your down payment, only the bank does. It just pays the seller (and/or yet another bank that holds the seller's mortgage). Now, you could work out a very under-the-table deal on that $5000. That's fraud, of course. Why $10,000? There used to be FHA loans available for 90%, even 95% of purchase price. Check with a mortgage company. Will the seller offer a land contract? (That's where the seller offers the financing for some period, after which the rest is paid or seller gets the house back.) A 3 to 5 year LC should put you in the driver's seat in a rising real estate market, as when the contract comes due, although you'll have paid down only a few bucks of the principal, the house will have appreciated to the point that the ratio of (what you must pay off)/(what it's worth) will be small enough that a bank should lend you the money. Never take a LC less than 3 years. But why do it alone? Find 1 or more persons in the same straits, and you'll have the money you need. I ran a housing co-operative back before I sold out, got a more communal lifestyle in my blood, but you can co-buy 2 and 3 unit buildings, or a large house you can convert to apartments, and live your piece of the American dream by yourself. As Mr. Spock himself said, "There are always options." -- *** *** JE MAINTIENDRAI ***** ***** ****** ****** 08 May 84 [19 Floreal An CXCII] ken perlow ***** ***** (312)979-7261 ** ** ** ** ..ihnp4!ihuxq!ken *** ***
rcd@opus.UUCP (Dick Dunn) (05/16/84)
Question on buying a house: >The buyer and seller agree at a price of $50,000 (for instance). >The buyer needs to come up with 10,000 for down payment/points/etc. >but only has 5,000. Can the seller give(lend or whatever you want to >call it) the buyer 5,000 to meet the down payment and sell the house >for 55,000?? The mortgage would be higher but... Several people have noted that this is legal, perhaps common, but there may be problems about outstanding loans to the buyer. Another point to consider is that, even if you try to conceal the $5000 changing hands, the lender may find it important that the house appraise out at $55K rather than $50K, which can get sticky. If you're the seller, you'd best consider the situation carefully. This certainly isn't a good situation for the seller to take a second, for example. -- ...A friend of the devil is a friend of mine. Dick Dunn {hao,ucbvax,allegra}!nbires!rcd (303) 444-5710 x3086