Okay here is the story I have a condo which I have a mortage on and I am renting to a friend. I would like to get completely out of the property and sell. The renter will not qualify for 100% financing so their loan consultant told them to do a seller second. What are my risks involved if I agree ? Who is responsible for the mortgage if she defaults. The numbers are as follows - balance on my mortage is $142,000 she can qualify for 80%. I was told by her motgage company that after one year she can re-fi and get 100% financing, is this correct ?
Thanks for your assistance,
Tony
Well, if you are doing a 20% 2nd to help her get to 100% financing, your risk is that if she goes into default on either the first mortgage or your seller 2nd, and the bank can’t sell the house for what you sold it to her for, you will not get the full amount of your lien.
Your 2nd lien should be recorded at the courthouse and attached to the property so you have an official lien on the house. That protects you so that you will get something iin the event of a foreclosure, but the 1st lien holder always gets their money first. By filing the lien officially, it also protects you because you can then initiate foreclosure proceedings if she doesn’t pay you.
As far as 100% fianncing in a year- that would depend on the job she does to put herself in a position to be able to get a 100% loan. Obviously, if you are being asked to carry the 2nd, she doesn’t qualify for 100% financing right now for whatever reason. So there is not guarantee that she will be able to obtain a 100% mortgage in a year.