Wrap Around / Sub To Sale - How is DTI Affected With a New Loan??? HELP!

General Real Estate Investing
1

Hi Everyone,

I hope someone can help me out here. I have an investment property in the Stone Oak area of San Antonio Texas, which I could purchase at a small discount and wholesale either using a wrap-around or via a sub-to purchase.

The current owners are very strong financially with good FICOs and solid W2 income. But there is a problem…They want to sell this house and immediately purchase another property conventionally from a builder.

So my question is this…Is there any way to “wash” or cancel out their debt on the existing mortgage so they can still qualify for their new mortgage? I thought about just doing some sort of lease or lease option, but for the new loan they would need a 25% equity spread to count the rental income from the existing property, or so I hear, which they do NOT have.

Does anyone know how this will pan out for their new loan? Is there perhaps another way I can buy and flip this house that will help improve their debt to income ratio for their new loan?

Thanks in advance for any help! This particular area of town is the best place to live in the entire city and this house is an absolute home run, not to mention I already have a buyer lined up.

Sincerely,
Ryan.

2

Make a purchase contract in: John Doe and / or Assigns!

Then take and do an assignment to your new buyer, let them qualify and arrange new financing for the purchase.

You make what ever spread you create in the assignment. Ten, fifteen or 20 grand, you get a sale done and your seller gets out of there loan.

Make it win / win for everyone and your a hero!

The seller has to get out of this loan to qualify for there new house!

3

Thanks for the response, but the whole point is that IF the seller gets out of this loan, which means a conventional sale, my deal doesn’t happen.

I don’t see how using an assignment of contract would in any way wash the debt of the sellers existing mortgage so they can qualify for their new loan. Could you clarify?

Thanks.

4

How does your deal not happen? It only can not happen if you are intending to make this a rental and purchase it with owner financing.

One of the neat things about being a real estate investor is opening your mind, make money with what ever process you need to use to make the deal work.

If you only have real estate education in Subject Too’s and wraps you probable need more education to make money out of just about any circumstance and not be negative or take the “I can not do it road”.

If your given lemons, don’t quit! Instead make and sell lemonade!!

5

Maybe I’m not explaining this clearly enough…My clients are only going to move if they can buy their new home. The home they are currently living in, is the property I want to buy. Using any method of creative financing such as lease-option, lease, contract for deed, wrap, or sub to is going to leave the existing property on their credit and it will then factor into their debt service when they try and qualify for a new loan. They will be disqualified because their DTI will be too high…Therefore I need some sort of way of structuring this deal to wash the debt by counting the income they will receive from the new buyers paying on their mortgage.

Furthermore, while I may be a new poster here, I am a rather seasoned investor. I have done most creative financing, property management, traditional realtor and loan officer work, foreclosures and short sales. This particular transaction is worth 10k for maybe 20 hours worth of work.

Before you recommend that I further my education, I would appreciate it if you gave me some actual workable advice. I own enough Ron LeGrand and other investor “guru” courses chocked full of motivational “given lemons, to lemonade” sort of stuff.

This is a wholesale transaction to its core. I sit in the middle and make money. There isn’t enough equity to do the deal any other way.

If anyone has anything tangible that could help I would love to hear it.

6

Hi Ryan, my apologies to you. This is not personal mind you and while I am a little direct in my postings, I am also aware there are potentially hundreds or thousands of other investors learning from our postings.

Yes, I understand your clients can not move unless they can sell there house. If you make a contract with them with a 60, 90 or 120 day closing giving yourself enough time to find a buyer who can qualify for a new mortgage and buy the property then you can use an assignment.

You make the contract with all the contingencies long periods, say in a 90 day close you make it a 60 day inspection period, and either a 60 day loan approval period or a open loan approval period where you and your end buyer have time to work.

You put just as little of a good faith deposit as possible, lets say $1,000

If you contract for $250,000 with a new first for $200,000 with 10% down and a new second for $25,000 lets say.

When you make your contract you make it Ryan __________ and / or assigns. This allows you to go out and get your end buyer and sell them the property for lets say $270,000.

The terms of your contract for loan type and down payment can be modified by using an addendum.

You have your new buyer pay you, lets say a $2,500 good faith deposit and they except your current contract and the legal time remaining to close by way of an assignment form. Your seller has to except the assignment because they excepted your contract “And / or assigns” and you get the difference from escrow minus the good faith deposit you recieved.

The escrow company excepts your new buyer and substitutes your name and information for your buyer (Assignee’s) information.
They qualify for the loan and close on your contract, except your not on it, you just get your assignment fee at close of escrow.

The only hitch is the property has to appraise for your original purchase amount plus your assignment amount, because the lenders they use for thier loan see and know you are recieving money from escrow and the property must be worth at least both amounts.

You pay taxes as usual on your spread in the deal!

There were a lot of these assignments being used in the hot market two plus years ago in Arizona, Nevada, Florida and California because the minute you contracted something, if it was a good deal, buyers were buying these assignments on the spot!

I hope this helps.