Home>Discussions>YOUR HOME>Home & Real Estate>"Owner will carry with 1/2 down" ?
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TOTALN00B
"Owner will carry with 1/2 down" ?

Has anyone here pursued this sort of house before ("owner will carry with 1/2 down")? I'm having trouble getting financing because despite excellent credit and provable qualifying income for this year and last, my 2009 income was really low because I didn't open my business until the 4th quarter of the year, and the startup expenses ate up the profits for the quarter. This means I can't qualify for as much as I need to, despite being able to put 25% down. So....

There is a beautiful saltbox fixer listed just a few houses from my mother's, in a good neighborhood, with the mysterious (to me) "owner will carry with 1/2 down" tag. Since I can only qualify for a low amount, but only have about 30% to put down on this particular house, would I be able to get the remaining 20% from a bank loan, or is this a no-no? And then would I pay the remaining amount each month to the seller, w/o the bank's involvement at all? (Or alternately, could I put 20% down, leave 10% for repairs, and borrow 30%?). Sorry, I'm confused as to what this entails and whether it is feasible for me. "Total n00b" here.

I will qualify for a much higher loan amount in 2012 after I do this year's taxes, if that helps, but I need to move soon (have waaaaay outgrown our apartment), and rent prices here are $1200 for a 2-bedroom vs a $900 monthly payment (incl mortgage + property taxes + insurance) for an average 3-bedroom house. I reeeeeally don't want to move all my stuff into another overpriced, crappy rental if I can help it! :(

JLMCDANIEL
Re: "Owner will carry with 1/2 down" ?

What you are talking about is a land contract, and no, the bank will not loan you money for the down payment. Land contracts can be very dangerous and you should have a lawyer involved to protect yourself.

With 30% down and excellent credit you should be able to get a bank loan to buy the property providing the property will appraise for the sale amount.

Jack

johnjh2o
Re: "Owner will carry with 1/2 down" ?

Years ago I was in the same situation you are in. I had good credit with a large down payment but I was also growing a business. All my income was going into the business. At the time they had what was called a none income verification mortgage. It was based on your credit rating only. Not sure if they are still available in this market but it may be worth a try.

John

Gizmo
Re: "Owner will carry with 1/2 down" ?
johnjh2o wrote:

Years ago I was in the same situation you are in. I had good credit with a large down payment but I was also growing a business. All my income was going into the business. At the time they had what was called a none income verification mortgage. It was based on your credit rating only. Not sure if they are still available in this market but it may be worth a try.

John

They are called NO-Doc Loans.

http://www.nva-mortgage.com/no_doc_loan.htm

TOTALN00B
Re: "Owner will carry with 1/2 down" ?

Thanks, everybody! I ruled out this particular house because after looking at it, I realize the repairs needed are way out of my league (probably why they had to do an owner-carry). But I'm sure your replies will be helpful to the next person considering this option.

dj1
Re: "Owner will carry with 1/2 down" ?

Regardless whether you buy this house or not, you've raised interesting subjects.

The "no doc" loans, also known as "stated income" loans, are now history. Banks are not making those loans anymore.

Banks will not lend the down payment, even if the buyer comes with 30% and seller carries 50%.

It seems like today, banks lend only to folks who can prove they don't need the money...
:confused:

TOTALN00B
Re: "Owner will carry with 1/2 down" ?
dj1 wrote:

It seems like today, banks lend only to folks who can prove they don't need the money...
:confused:

EXACTLY!!!!! It is so frustrating! So if your income is average (or you can't prove it), your only option is an FHA loan, and then you have to pay an extra $150 - $300 a month in mortgage insurance (which does not benefit you at all, it's just to insure the bank against you not paying your mortgage), which ended up pricing me out of the loan amount I needed for an average house here! If your income is low = YOU PAY MORE!

But finally one of my broker's lenders agreed to use only my 2010 income (higher than 2009 because of startup expenses for my shop), if I put 25% down. Which is a lot of money, but it looks like that's the only way I can get a house before April 2012.

TOTALN00B
Re: "Owner will carry with 1/2 down" ?

By the way, I think all these new fees and hoops to jump through pricing average buyers out of houses (my income is above average for this county), will result in home prices continuing to fall. Off the original topic, sorry, but it just seems like it has to have some effect in that direction.

dj1
Re: "Owner will carry with 1/2 down" ?

Home prices in most areas will continue to fall, but not necessarily because of high loan originating costs.

They will continue to drop because of chronic unemployment and whatever comes with it (namely, lower wages for the employed).

Certain sellers have to sell. maybe because of a divorce, death in the family, school district or moving. They have to sell and get out of the home. And if there are no offers, well, their selling price drops. If they take their homes off the market - then they weren't really in the "must sell" category to begin with.

A smart buyer, who is not in the "must buy" category and who is "sitting on the fence", will gain when he finally purchases at rock bottom.

"All cash buyers" (yes, they do exist) have a lot of playing room in the current market too. When a desparate "must seller" gets an all cash offer, he will be stupid to stay firm.

Econ 101.

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