Found a homeowner who is in default and I want to buy the home for myself?

Question

My credit is about 570 Just curious how I can go about helping this family and helping myself get in a home. I have heard stories of people signing over the deed, but I am not forsure if that is best choice, and Is that legal ( I am in California) and if that was to happen do I need to obtain a loan on my own ( which I don't think I can do for 100% financing)or do I just take over the payments? Any suggestions or info on how I can buy this home would be appreciated.

Answer 1

What mudisfun and satarnag are trying to work around is the “due on sale” or “alienation” clause in the current owners loan. What they are trying to do is hide from the bank that they sold the property. Of course the current owner probably has a government insured loan, so you are putting yourself in federal jeopardy by playing along, not to mention that if the bank does find out (say in 6 months) they will probably accelerate the loan (call it due in full) and you will be out all you have paid into the program.

Consider another idea, lease option at a fixed purchase price with a part of each lease payment going toward the agreed purchase price (equal to the equity build up on the loan). The option payment would be equal to the amount necessary to cure the underlying loan, a clause would prohibit the current owner from further encumbering the property, the lease payment would be equal to the PITI (Principal Interest Taxes Insurance) payment, AND YOU WOULD RECORD THE OPTION AGREEMENT. You can set the term long enough to either clean up your credit, or build enough equity to sell at a profit.

Think about it for a bit, run it past an attorney paying attention to the length of the lease option.

Good luck and best fortune with your new house ;->

Answer 2

What mudisfun stated is your best bet, however I wouldn't cure the loan or make payments for 2 years. Once the owner creates and places the property under the trust, I would have immediately bought the trust from the owner. At this point, you just have legally assumed the loan without the bank's knowledge. Now you can cure the loan and make monthly payments without risk. It would suck if you cured the loan and made payments on the mortgage and the owner decided not to sell, but I am sure they had the property or trust under an option contract to protect themselves.

By the way, if this deal doesn't work out and the home is in Southern California, I will pay you $500 for a finder's fee if you contact me and I end up buying the place.

Regards

Answer 3

My boss and his wife did exactly what your looking to do (his wife is an attoreny which helps here).

What they did was have the owner of the property who was in default transfer the deed to a trust which they set up and they went on title; they then paid the mortgage up current which got the property out of default. My boss and his wife then paid the mortgage for the next couple of years which remained in the old owners name. After a couple years they then refinanced the property without the old owner. pulled the property out of the trust and had the old owner quit claim off title.

The difference here is my boss and his wife had the credit scores to buy the home if the old owner would not go along. Also, you will need to get a lawyer involved to draw up the trust and payment agreements. The advantage to going this route is huge for all involved

1) Gets the owner off the default hook,
2) Allows the old owner to obtain 'credit repair' by having the mortgage paid on time for several years which raises her score,
3) Allows you to get in for minimal money down,
4) Keeps the equity in the property without having to pay a Realtor commission,
5) Allows you to refinance in a couple of years and own the home free and clear.

The only money changing hands in this scenario is you paying the mortgage current and getting the old owner out of the huge hole they are in and hopefully saving you a ton of money.

Hope this helps. If you have specific questions drop me a line and I will get all of the details from my boss.

Kevin 866-562-6838 x 106
[e-mail]
www.firstratelending.com

Answer 4

well first off if your credit score is only 570 then your best bet would be to have them sign over the deed because a bank or lender might have a hard time getting over that score.

Answer 5

Go see a Mortgage Lender.