Question: > I’d like to buy the house I’ve been renting for 4 years, and my land- > lord would love to sell it to me. Trouble is, I don’t have a down > payment or closing costs. What’s a fella to do?
> If I could finance the whole purchase price, payments plus taxes would > be 23% of my gross income. I have no other debts, and if the average > of 3 credit card applications per week is any indication, my credit > rating is good.
> Can anyone suggest some creative financing ideas I might use? My > landlord has offered to help, but said he can’t finance the sale.
Answer: I can think of several:
First, try FHA. This is a fixed rate (or variable) program which allows 3% down (With your income, if you saved, say 1/3 of your gross income for 3-4 months, you’d have that–use a long escrow period–and scrimp!)
Second, try lease/option. This allows you to remain a renter, but with a fixed purchase price in 6 mos or a year. Have your landlord increase your rent 20%, then credit 33% of your total rent towards your eventual down payment (kind of an enforced savings program, with your landlord helping to match your “deposits.” He gets to keep it all if you don’t buy). You may have to agree to pay a little more than market price, since it’ll actually “sell” next year.
Third, try getting a new 80% loan, then have your landlord carry 20% as a second mortgage. Most lenders won’t allow this (and maybe your landlord can’t), but at least one in California will (Bayview Federal).
Get really creative, and find an investor. He puts up 20% cash, you make all the payments, and you each own 1/2 the house (This is vintage Paul Simon, and the amounts/percentages can slide all over the map, but this is typical). Have a lawyer write, or at least look at the deal (good idea in any case).
I presume you’ve thought of this, but try your relatives. If you’re solid, a small loan (like 3% of the SP for an FHA loan) is a good investment for mom and dad, or even great uncle Ralph. Make it a true second mortgage, recorded, to protect their inteest.
If the property is in a “rural” area, you can try Farmer’s Home Loan program. This is similar to FHA, and the house qualifys similarly, but it’s a 100% loan
E-mail me, or post here, if you have questions.
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