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Old 06-20-2014, 01:48 PM
 
Location: Myrtle Beach, SC
10 posts, read 13,239 times
Reputation: 10

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Hi everybody. I am new to this forum and am hoping that I am posting in the correct place. I have a question regarding refinancing a house. I bought my home for $160,000 when i was 19 years old in 2012 from a private seller. Because of my lack of financial history at the time i was not able to get a conventional mortgage and therefore bought the house using a land-sales contract agreement - the owner is financing the property to me. My parents were also not willing to help/cosign for me so i was left with very few options in regards to purchasing a home. My payments are $1,500 (yes i know that's a lot for this amount however the mortgage is being paid off FAST). I now believe that that i have the credit history and income necessary to get a bank loan for the remaining amount owed (about $120,000) but am curious to know if anyone on here has refinanced a property the way that i am looking to do so. I pretty much want to get a loan from the bank to buy out the guy who sold the property to me. If i get a bank loan for the remaining balance over 30 years my payments will be SIGNIFICANTLY lower. My question is how much will this cost in Bank fees? They are not going to require a down payment again because i already have equity in this house correct?

My reason for wanting to refinance is that a lower monthly payment provides a bigger safety net. I am only 21 and am taking on a lot so I want to make sure i'm financially safe and am not getting in over my head. I recently purchased another property that cash flows about +$400/month and plan to purchase 3 more before the year is over but this $1,500 payment is dragging me down and i want to reduce it before following through with more purchases. I live in the house and rent it to roommates and could be cash flowing +$1000/month if i can refinance!

I hope this all makes sense. Any info/advice would be greatly appreciated. Thanks!
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Old 06-20-2014, 02:23 PM
 
3,659 posts, read 7,981,238 times
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You are refinancing a home that you own but you have a private mortgage.

What state do you live in?
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Old 06-20-2014, 02:32 PM
 
Location: Phoenix, AZ > Raleigh, NC
15,699 posts, read 20,137,906 times
Reputation: 25664
wish you had done this BEFORE you bought that other investment house. As I'm sure Pfhtex will tell you, that may screw up your debt to income ratio. Don't take on any more debt (including car loans, mortgages, etc.) until you get your HOME refinanced!
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Old 06-20-2014, 02:46 PM
 
Location: Myrtle Beach, SC
10 posts, read 13,239 times
Reputation: 10
Yes, the house is in Myrtle Beach, SC. The only reason that i went ahead and purchased another investment property was because i got a great owner finance deal that i wanted to jump on (they are very difficult to find in my area). The house was in the area that i want and the owner only required 7% down and its amortized over 25 years which is grat. I know that this could screw with my dept-income but does the fact that i have equity in the second house and am also making another $400 outweigh that at all?
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Old 06-20-2014, 03:03 PM
 
3,659 posts, read 7,981,238 times
Reputation: 4657
Talk to a lender. Don't shop for a lender on the internet - that means don't put your info in to a website like Lending Tree. Explain everything, give them your financial docs, let them pull your credit. Start with the Private Mortgage part.

It's not the Private Mortgage part that will present the greatest issue, as long as there is a contract, the title was recorded properly, and you've made trackable payments, not cash and not inconsistent amounts. It's the overall debt ratio, and having to prove out the payment history on the other house as well.
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Old 06-20-2014, 03:17 PM
 
Location: Myrtle Beach, SC
10 posts, read 13,239 times
Reputation: 10
The transaction was handled by a lawyer so the contract and title work was handled appropriately and is filed with the county. The guy who i bought the house from that i am making payments to lives right near me so the payments are cash payments and i get a receipt for the payment every time one is made. Also, for the most part the payment amount is consistent but there have been a few months were i have paid extra just to knock some $$$ off the principal owed. This shouldn't cause any problems should it? And when refinancing do you think i will have to provide any sort of down payment to the bank if the house is appraised at $150k-$170k and i only want $120k since i have already paid off about $40k? Thanks a lot for the responses!
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Old 06-21-2014, 10:08 AM
 
Location: Phoenix, AZ > Raleigh, NC
15,699 posts, read 20,137,906 times
Reputation: 25664
I think Pfhtex was referring to proving the rent payments from your tenants in that rental property. I'm guessing that you haven't owned it long enough to have enough history of rental income to use the rent as income towards YOUR ratios to get your refinace.

PS why on earth are you making your mortgage payments in CASH??????? For goodness sakes, just write a check!
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Old 06-21-2014, 11:10 AM
 
Location: Myrtle Beach, SC
10 posts, read 13,239 times
Reputation: 10
For the most part the rent that i collect is in the form of a check so is entirely traceable. I also have a signed lease from the tenants. And yes i know sometimes cash payments were easier though. I started sending checks instead recently.
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Old 06-21-2014, 12:36 PM
 
Location: Phoenix, AZ > Raleigh, NC
15,699 posts, read 20,137,906 times
Reputation: 25664
Quote:
Originally Posted by Kzeccola12293 View Post
For the most part the rent that i collect is in the form of a check so is entirely traceable. I also have a signed lease from the tenants. And yes i know sometimes cash payments were easier though. I started sending checks instead recently.
Right, but you don't have a very long history of that rental income, right? Many (most?) mortgage lenders require at least one year of history before they will include it as income for your OWN mortgage, some require 2 years. Documentation of the rental income is usually your tax return (Schedule E) for the prior year. You won't have that tax return, and that's what they are looking for. Even when you do have the rental income history, only 75% of it will be used towards the mortgage ratios.

Basically, you need to see a good mortgage broker who can assess your income, debt and equity in this home. In the meantime, you can play around with these calculators, but I'd suggest you leave out the rental income and just include whatever W-2 income you have right now.

http://www.bankrate.com/calculators/...alculator.aspx

http://www.bankrate.com/calculators/...-i-borrow.aspx
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Old 06-21-2014, 12:48 PM
 
Location: Myrtle Beach, SC
10 posts, read 13,239 times
Reputation: 10
Are you referring to the house that i'm trying to refinance or the second rental property that i bought?

-I've had the house that i'm trying to refinance for a bit over a year and the first month it was rented out was May of last year, and it has been consistently rented since.

-I bought the second house about 2 months back and it has been rented for about two months.

But i do see what you're saying about most of this not being on my tax returns. My tax return only shows the rent from my first property from last year. I'm most likely going to have to try to find a co-signer for a loan or wait until next year when ill have more to show on paper. This is such a p.i.t.a. I hate to be breaking breaking even when i could potentially refinance and cash flow almost $1000/month.
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