Real Estate: How to Help Your Tenant Can Get Their Loan the Easy Way

LOCAL RECORDS OFFICE – Real estate has been booming in 2016 in this article the pros at Local Records Office will be talking about tenants and loans. Because homeownership is often less expensive than rent, we could see some of our rent-to-own tenant buyers start trying to execute their options. If you don’t have tenant buyers, you may want to consider using them for your rental property. You will generally get more rent and less hassle. In my experience, less than 20% of tenant buyers end up buying the home, but for me, I am happy when they do.

 

I like getting a large payday, with no Realtor fees that I can roll into another deal. For this reason, I want to be sure my lease option documents are prepared correctly, to help their chances of getting a loan.

Buyers vs. Sellers

 

There are many effective and valid ways to structure a lease option transaction, depending on the parties involved and the objectives in mind. What a lot of sellers and buyers often overlook is that one of the most important “parties” to this transaction is the underwriter on the buyer’s loan, when the time comes to exercise the option.

 

One of the most important things to know about today’s new underwriting climate is that the tolerance for inaccuracy is down to almost zero. Much like I would recommend a good attorney review your documents, I think it is crucial for a good mortgage broker or banker to do the same. Here are ten helpful hints to ensure the tenant buyer’s loan closes:

 

“Rent credit should be allowed to be used towards the buyer’s down payment”

 

Rent credit should be allowed to be used towards the buyer’s down payment or minimum borrower contribution only if the rent actually charged does not exceed the fair market rents in that neighborhood. It is actually best to write your agreement that the rent credit reduces the purchase price and is NOT considered down payment. If they need the additional down payment, you may be asked to prove the rent credit is equal to the amount they paid above market rent, which is not going to be an easy task.

 

Fair market rents will be determined by the appraiser in the subject property’s appraisal report. Credit for down payment must be accrued for a minimum of 12 months.

 

It is best to get as much money upfront as possible because all of that can be credited as down payment. You can reduce the amount of money the tenant buyer needs by offering to pay their closing costs. This could also be part of the rent credit, if it is structured correctly.

 

The Lender Needs the Right Documents from You

 

The lender will require a copy of the rental or purchase agreement evidencing a minimum original term of at least 12 months, clearly stating the monthly rental amount and specifying the terms of the lease.

The lender would like to see that the lease agreement references the purchase option and vice versa, or they are contained in a single contract, so the underwriter can have documentation of both aspects of the transaction. I have my option reference the lease but I want the lease to stand on its own; so for me the lease is a separate agreement that does not reference the option. This is how most attorneys would suggest you do it, so it is a good idea to run your contracts by a competent attorney AND a mortgage professional.

 

In no case should the seller ever commingle the borrowers rent credit, purchase option deposit, or security deposit with their own personal accounts.

 

Make Sure to Document Every Transaction That way You’ll Be Prepared

 

Any rent credits, option payments and security deposit funds should be thoroughly documented to include copies of the original checks, copies of the cancelled checks, and copies of the account statements showing their entrance into and retention in those accounts.

 

Lenders will require copies of the buyer’s cancelled checks or other proof of payment for the last 12 months evidencing the rental payments. Be sure the tenant knows this if they are paying with money orders.

 

Equity

 

Sweat equity is normally not an acceptable source of funds or credit; only actual monies paid as outlined above, so don’t count on the buyer “earning” their down payment in lieu of rent payments.

 

Taking the above measures should help ensure a successful closing if your buyer can still qualify in all other required areas. With that said this article is not meant to replace a competent mortgage professional. Please visit Local Records Office’s webpage for a list of vendors they recommend.

 

To learn more about real estate and Local Records Office go to http://www.LocalRecordsOffices.net

What is A Mortgage Loan?

A mortgage loan, also referred to as a mortgage, is used by purchasers of real property to raise funds to buy real estate; by existing property owners to raise funds for any purpose while putting a lien on the property being mortgaged. The loan is “secured” on the borrower’s property. Mortgage loan is different from a reverse mortgage, read here for more information.

This is What You Need to Know About Reverse Mortgage Before Meeting With Your Specialist – Local Records Office

LOCAL RECORDS OFFICE: Let’s face it; retirement can be an expensive undertaking. For most people, they’re bills increase, and their income a decrease says, ‘Local Records Office’. For people who own their own house, reverse mortgage specialists can help alleviate some of the financial burden of retirement. These loans are also known as home equity conversions, or HECM for short. So here are three things to know about HECMs.

What Is a Reverse Mortgage?

Local Records Office says, “The basic principle is centered on the equity of a property”. A home’s equity is its value, minus the amount of any outstanding loans. So if a house is valued at $150,000, and $30,000 is still owed to the bank, the equity is $120,000. So what an HECM essentially does is it allows homeowners to borrow against the equity of their house, while at the same time halting any payments on the home’s note. Owners simply have to continue paying the taxes and insurance on the property. Since the loan type is designed for people in retirement, applicants must be at least 62 years old to qualify. Furthermore, the house that the loan is being taken out on must be the applicant’s primary residence.

READ MORE: Top 5 Real Estate Scams

How Can It Be Dispersed?

As discussed above, the purpose of an HECM is to help elderly homeowners supplement their income. Since every person has different financial duties, reverse mortgage specialists can work with applicants to find the best disbursement method. The first option is a lump sum, which most applicants deposit into their savings account. The second option is to establish monthly payments to the homeowner for a set number of years, or even for life says, Local Records Office. For people who have trouble handling money, this can provide a steady income. The third option creates a line of credit for the homeowner, to use at his or her own discretion. This is a wonderful choice for an applicant who has enough to handle month-to-month bills, but would not be able to pay for an unexpected expense such as a damaged car or a medical issue.

READ MORE: How Does Mortgage Really Work

When Does The Loan Come Due?

One of the biggest perks that reverse mortgage specialists like to tout is that an HECM allows people to stay in their residences until they pass away. Along with the original borrower, any non-borrowing spouse can also continue to live in the residence, payment free, until they die, as well says, Local Records Office. In order for borrowers to stay until death, they must continue to pay property taxes and insurance, provide the property with basic upkeep, and maintain the title in their own name. When the loan finally becomes due, the heirs of the property can pay it off and keep the residence, sell the house to settle the loan, or allow the bank to sell the house.

To learn more about real estate and Local Records Office go to http://www.LocalRecordsOffice.co