I have a property that tenents are asking to me to owner finance. Without knowing how this thing work, I was not able to tell her anything.
Property is worth about 139K. She pays rent $1150/month. I have fianacing on the property for 80k. The payment is about $950 including mortage, tax and other expenses.
How does owner financing work? Do have to payoff my lender before I can finance it? how does the transfter take place. I am in Texas.
TFAH
DFW
If you sell it to them, then yes, you’ll have to pay off your existing mortgage and then hold the new mortgage (which would be recorded against the title of the home). So you’d have to come up with $80k to pay off your crurrent mortgage, then you’d sell the home to them, you’d hold a new mortgage for whatever amount they need to finance (probably the entire amount since they are looking for you to finance it, otherwise they would be able to just go to a lender and buy it with the lenders money), and they’d pay you off under whatever terms you’ve laid out in your mortgage.
There are only a handful of instances where I’d hold the paper on a home that I owned. Usually holding the paper means the people buying your home can’t qualify for a mortgage elsewhere, so if they don’t clean up their credit, etc. they might not be able to get a new mortgage to pay yours off. If I had a hard time selling the home, and I needed to sell it now, then I might consider holding the paper - but if your market is still easy to sell homes in I’d look for a buyer who could qualify for a mortgage from a lender.
Why are you considering selling the home?
I believe in Texas you can do an AITD (All Inclusive Trust Deed, or “wrap” for those states that have mortgages instead of Deeds of Trust), which is basically new financing that wraps the existing financing.
You can also have the tenants get conventional financing for the majority that will pay off your loan and (hopefully) put some money in your pocket with the difference. You can then create a second note for the remainder.
Well there you go, a seller carried 2nd could be one way to help them out and still have your existing mortgage paid off.
Never heard of an AITD before… sounds like the existing mortgage would have to be assumable or transferable, or is the original borrower still obligated on the mortgage even though someone else would be on title of the property?
Of from what I understand is that I keep the current mortage on my name and create AITD with buyer. The property stays on my name (kind of) and collect monthly payments from buyer.
Where can I more infor on AITD?
Thanks,
DFW
Anyone in Texas doing Owner financing without paying off your original mortage and use AITD to wrap around?
I would love hear your experience.
DFW
DFW,
Check out this web-site. www.aireo.com.
Do a search on “wraps” you will find a wealth of information.
I am in Texas, the best way for you to do this is to do a Contract for Deed. You do not have to pay off your mortgage company off, just make sure you make your payments on time. YOu are not conveying this to your renters until they have completely paid you for it. Once they have been under the Contract for at least one year, I can get them a loan to refinance from the Contract for Deed. They do need to make sure their credit is in fairly good shape to get this done. It is always a benefit to them to do a refi as they will not have to have a down payment, closing costs can be put in the loan, etc. It is much easier on everyone. At that time the mortgage company is paid off and if any difference goes to you.