hey, i’m just trying to get creative here. since banks won’t finance rehab & hml are so expensive i thought about buying a house on a lease option and doing the rehab while it is under the lease. when it’s all done i should be able to get financing through a bank. i could ask the owner for permission to have it inspected before we even sign the lease to cover my butt. my only negative thought is making sure the title stays clean while i’m under lease/option. how do i protect myself from the seller going out and getting some stupid lawsiut on a house that i want to buy? any other negative side to this suggestion is appreciated. P.S. what is fair to put down on my option? figured i should put a small amount down since i’ll have to come up with a dowm payment when i buy in the future
kimesha,
There are some banks that will do rehab loans. Do you have money for closing costs? I can’t really help regarding the lease option. HML can easily carry a high interest rate. If you have a decent credit score, there are some banks out there that offer good rates on rehab loans.
afmdfw
OH NO! KIMESHA,
You are putting in money in something that you do not own or have title to.
That is very risky and if you are willing to fix up a house for FREE go right ahead.
What happens if you fix the house up and they decided not to sell to you and you can’t do anything about it but put a lien against the house and you may need added court costs to do that in some states. Especially if you are not a general contractor you would not have a chance to put lien on the house like in florida.
If you are so worried about acquisition cost why not partner with someone or get a Private lender or acquire it with sub2 and then you will have no cost but to fix it up
Kimesha,
I live in Bham, AL. I purchased a home with a lease option (owner finance structured contract). I purchased the home (stipulated in the contract) for $39,000. I gave the owner $2500 down payment (stipulated in the contract) and made payments[b] by personal check only based on a 15yr amortized mortgage schedule (stipulated in contract). I made slight improvements over a 12 month period. After 12-months the home appraised for $68500. I refinanced the home leveraging of the equity, and got $9000 dollars cash-out to complete the largere rehad needs. Now the home appraises for $74500! Looking to do my need deal in the next 60-days!
Yes, millionby35 you did only slight improvements and you did not do the major improvements until you owned the house.
All I am saying you just don’t want to risk alot of your money until you own the property.
richmortgagebroker,
i understand all that you are saying and appreciate your answer but just to clear up my original post, i do not plan on doing any MAJOR rehab. i don’t mind doing heavy cosmetics and maybe put on a new roof. but as a newby i’m trying to stay away from anything that might require ripping something out of place and replacing it all together( besides carpet). maybe you can change my mind!
Well even with Minor improvements you are putting money in a house that you do not own and could potentionally loose if the seller for any reason decided not to sell it to you.
If you are willing to put carpet into someone elses house before you own it that is a risk you are willing to take it is all up to you.
I personally don’t like that risk.
A good mortgage broker will be able to get you in that house without a lease option, unless that is your last resort.