I am a renter with a good track record for the past two years. My landlord wants to sell his home, but would prefer to sell to me and we do want to buy. Problem is our credit is poor due to income reduction in our family. We are slowly making headway on credit, but seems like it will be a couple years until we have an acceptable credit score for traditional financing. My landlord is open to like a lease to purchase, but not sure about owner financing. We pay $1,600 month now. From what I know, the owner wants to sell the house for about $265,000. He owes about $180,000 on it. He is trying to sell because he would like to get some equity out of the house. We want to buy it, but not really sure how we can given our credit situation. We are capable of making higher payments, up to about $2,000, but not sure how we can position this to the seller. Any help or advice is appreciated.
san1nh,
One way that comes to mind is the seller can take out a loan on his equity and you would then take on the payment obligation if the rate and amount were worked out in the contract and their is a risk for him so you may need to put up collatoral for him to do that.
In a land trust setup if you can afford as you say a 2K payment and have him for example allow you to take the taxable writeoffs under IRC 163 h 4 (d) if you can use the active writeoff -no tax advice intended this is just an example.
There is a contingency fund setup as well to protect the seller’s interest in the deal minimum one month…
It would also provide you 100% debt to income for him to purchase his next property if the financing was structured properly.
A lease purchase type transaction is more of a gurantee you will buy at a predetermined price at a certain time some 3-4 yrs down the road or whatever term is agreed to.
On the Lease purhcase side you can be credited say anything over 1600 toward the down payment on the property so lots of creative things you can do.
He can also do a seller financed note and if the note is structured right can possibly get closer to the asking price since even though your credit is not good you can show seasoning in that you lived there making payments. The note seller if you perform can sell say 9 months when you perform so there are quite a few criteria to consider.
YOu need to discuss this with him on what will work and make sure there is an equitable agreement between the parties since Iam just speculating at this point w/o knowing all the information.
Either way the best of luck to you…
:smile
There are many ways to structure the deal.
The most important pieces of information are what does the seller actually need out of the sale in terms of cash and if you use a lease option, seller financing or buy subject to, do you have a solution to your credit so you can qualify for a mortgage on your own down the line?