If someone bought a house on a land contract… and the seller wanted to get a new loan… would they have trouble getting one if the buyer has no credit and no assets?
Would the new lender get a credit report on the buyer?
I’m confused by your question.
Please reword this so it’s clear what you’re looking for. In one sentence you say…the seller wanted to get a new loan, but later ask about the buyer’s credit.
Thanks
Hi! What I mean is that if a seller sold a house through a contract for deed would they have trouble getting another loan if they left the present one in their name and the buyer had no credit, no assets but maybe put up a small down payment and they payments are current.
Would the new lender for the seller check the buyers credit or assets… the buyer who bought the sellers house on a agreement for deed. Thanks!
A lender will not be concerned with anyone elses income, assets , or credit other than their borrower.
Having 2 mortgages may create a high debt to income ratio which could affect financing. One thing to know is that some lenders will not use the income off the contract unless it has been received for the past 2 years and will continue for the next several years. Not all lenders will treat this the same as rental income.
I just read that article on creonline titled ‘Yes, they can get a new loan’ and basically he says he’s never had a problem with it. He says in the article that they’ll usually credit the seller with 80% of the incoming payment. So if the seller receives $4000 from you… the lender will credit the seller $3200. So if the underlying payment the seller has to make is $2500 its more than enough.
Which lenders are you talking about?
Of course in this we’re both assuming the seller had the credit/money to get a loan even before selling on a contract for deed.
Chris, this question IS confusing.
If the seller has sold on a CFD/LC then why would the seller trying to be getting a new loan on the property in the first place?
However, the real answer to your question is, it depends, even assuming the seller has the income/credit to get the loan.
Was the CFD recorded? If so, many lenders will see that as a valid sell and may not want to be an underlying mortgage.
What is the specific wording in the CFD concerning underlying mortgages? If it is not specific that the seller CAN refinance, then it may not be possible, especially if the CFD was recorded. Even if it says in the contract that the seller can refinance, every CFD that I’ve seen (and common sense) states that you cannot have a loan on the property for more than the sale price of the CFD and at no time during the CFD’s term, can your principle balance be more than the end-buyer’s principle balance on the CFD.
Raj
Hi Raj! The question I was trying to pose was not if the Seller could get a loan on the property they sold on the CFD… but rather if they could get a new loan on a different property which they will move into. Get it?
I’ve been told from many sources that they can in fact get a new loan even when they sold their old property on a CFD and there is still a underlying loan on the property which the CFD buyers payments is covering.
What I was trying to figure out is whether the credit/income/assets of the buyer on the CFD will even come up in the analysis of the new lender for the seller on the new house which he wants to move into.
Ah! The light cometh through!!
Yes, in most cases, the seller would not have a problem getting a loan for a new property IF they would not have had any trouble getting the loan in the first place (ie bad credit).
In fact, many lenders will count a CFD/owner financed property as a ‘sold’ property and so 100% of the payment is credited.
And no, the CFD buyer’s credit can play no part in determining if the seller can get a new loan for a different property. There is no way for a lender to pull the buyer’s credit without the buyer’s express authorization to do so, even if it would be a concern to the lender, but it won’t.
Raj