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Figure out how much it costs to own this home every year -- Taxes, insurance, repairs... Can you afford that on top of $2K/month house payments?
If so, ask your landlord if she is interested in selling it to you at its appraised value and carrying the note herself with $2K/month payments that include X% (whatever the going rate is) interest rate. It is her decision on whether to require a downpayment but that it will be difficult for you guys to get a downpayment at the moment so you are asking her to carry the entire amount.
Explain that she will be getting an additional $300/month plus be relieved of the bother and expenses of taxes, insurance, repairs, roof replacement, etc.
Think of your additional $300/month as the downpayment you are saving up for.
As I recall, the mortgage payments can be set up through a bank for a minimal fee with monthly payments that include a pro-rated amount for taxes and insurance.
Seems something like this would be a fair deal all around with little to alarm either the relatives or the authorities.
She would be relieved of the headaches of home ownership and have a higher monthly income as well as lower expenses.
You and your wife would be building equity in a home you already know you love.
The big downside is if you default. It can take a year or better to foreclose. Meanwhile, she's racking up legal expenses with no monthly check coming in.
She would be trading one set of problems for another. If she becomes a bank..... she has to deal with you not paying on time, hiring lawyer, foreclosing on you and then fixing everything you didn't have the money to fix in order to sell it or rent it again. Not something I would want to go through while elderly or in a nursing home.
She is simply better off selling it on the open market and be done with it.
Yes, it sounds like your trying to scam the elderly, and there are criminal laws against this.
I currently rent a house and would like to own it but am unable to get a mortgage, have zero credit and no money to put down.
Your not good with money, therefore should not be a homeowner. Figure out how to live below your means, save money, and by the time you have good credit again, you will have a chunk of money in the bank.
Contract or not, once she signs over the deed to you, she has zero guarantee that you'll be paying that monthly payment.
I wouldn't do this ever.
Why not try to save some money for a downpayment, and get an FHA loan.
Quote:
Originally Posted by ts_
Hi there,
I currently rent a house and would like to own it but am unable to get a mortgage, have zero credit and no money to put down. I think I have a solution...
I currently rent a house for $1700/month. My landlord is an elderly lady who owns and lives in a second house near by. The house is old and will need some major repairs over the next 10 years (windows, siding, kitchen). My landlord seems overwhelmed every time something needs repairing. She trusts me as I always pay my rent on time and we get on well.
I would like to propose to her that she gives the deed of the house over to me. In return I would then owe her the value of the house to be paid in monthly installments of $1000/month with the option to pay back sooner if I wish. The house would then be mine and off her hands and she will receive a steady monthly payment without any risk of unexpected expenses. I could then do as I wish with the house and the debt owed to her would be completely unrelated. Unfortunately as she is very old, she will not likely see all of the loan repaid in her lifetime but should she pass, the loan could then transfer to her children so it's an inheritance that she can also see some benefits from.
I have a lawyer in the family and am really considering drafting a proposition and contract and seeing what she thinks. This would save my wife and I $700 per month and give us some growing equity to our name that we can live in for the foreseeable future and potentially rent out ourselves should we move one day.
There are many pros I can list for both her and myself but I was wondering if this sounds like a good/feasible idea.
Any help, suggestions or feedback would be greatly appreciated. This is a new idea and I want to get some other opinions before I take it any further but at the moment I can't see a reason not to try it and see what my landlord thinks.
Well, I see what you are suggesting, but you are missing a few vital steps:
1. It sounds as though you are willing to pay her and/or her estate over a period of time. Is $1,000 a reasonable amount per month? We don't know -- what's the house worth? How long do you see making payments?
2. There is no way she is just going to sign the house over to you WITHOUT a mortgage. At least, she shouldn't. She would have no way of recooping her losses if you suddenly decide not to oay her any more.
3. You have "no skin in the game" in terms of a downpayment, etc.
4. Your credit is not good -- why would an elderly woman, who probably depends on the cash from this house for her living expenses, be willing to take more of a risk than a bank, who at least won't starve if you can't/won't pay?
Ideally, you and she could make arrangements for a lease-purchase arrangement, where a certainly amount of your monthly rent goes toward a downpayment. You can also do "in lieu of" in terms of specific repairs and improvements to the house, or a combination of cash and repairs, as long as it is all spelled out in the terms of the agreement.
At the end of the lease purchase agreement (one year, two years or more), then you could go out and get a mortgage and buy the house, using the equity you have built up as a downpayment.
Alternatively, she could elect to offer owner financing, assuming that she doesn't need the cash from the sale of the house. In that case, to protect both your rights and hers, a security deed/mortgage/whatever is used in your state will be drawn up specifying how much you are paying her each month, the length of the mortgage, etc. If you suddenly aren't able to pay, then she would have the right to foreclose and take the house back -- just like a bank.
Talk to a lender about their requirements for lease-purchase arrangements, so that you cross your t's and dot your i's before you are legally committed to a course of action that a bank can't/won't recognize a year or two down the road.
Or, just sit there for a couple of years, save some money, improve your credit, and just buy the darn house through a mortgage company. Check with a good mortgage broker and see if there are any no-downpayment-programs in your area -- that might help.
Renters - People that are not good with money (YOU)
Homeowners - People that are good with money
Landlords - People that are really good with money.
I know people that are poor that still manage to save money. They spend much less than they make. Its easy to do, but you need to sacrifice and go without many things you are used to now. Unless you change your lifestyle and standard of living, you will always be a renter.
PS. Rent a cheaper house.
PPS. Dave Ramsey Financial Peace courses are offered at local churches around the country. It will teach you how to manage money. I dont care how much money you make, its a good course and puts things in perspective.
If you're in a Deed of Trust state you can arrange options to buy and/or owner contract all you want.
My parents in California sold all their new built houses that way when things were soft in the late seventies and again in the early nineties, as they moved into cash.
If you're in a mortgage state not so much.
But if you're already paying 1700. a month the owner dropping to 1,000 is a little strange, unless she just wants to unload the property (which is a possible), but real estate law is now so complicated you might consult a lawyer for sure to structure a clean offer.
And watch out for that Elder Abuse thing; you could look real bad real quick no matter what you think your intentions are.
Tom, I see your zip says you're in Newport. My advice to you is to contact these people (link below). They help first time buyers who have credit and down payment issues. Although prices are high, there are cheap- usually smaller fixer uppers- houses in the Newport area or close in to buy- trust you are aware of RILiving MLS website.
I congratulate you on your desire to purchase and hope you go for some house- if not the one you're currently renting! You will be much better off in the long run.
The OP clearly doesn't recognize it, but he would be placing the elderly homeowner at greater risk by having her do owner financing as opposed to remaining a landlord.
Although the OP would need legal advice, the elderly homeowner would need it even more. Her family should also be made part of any decision, lest you want a future lawsuit on your hands.
This look a lot less like "OP trying to take advantage of homeowner" and more "OP is ignorant of how real estate ownership works". The first is malicious, the second is simply now knowing how things work, and I can relate.
OP: Most arrangements like yours, when accepted, involve a rent-to-own sort of scenario where you pay your normal rent AND an amount that would go towards the equity of the house. In other words, you'd still pay your 1700/month AND an amount on top of that (which would be your "payment").
It's been addressed, but the reason why your original suggestion wouldn't be accepted is because the homeowner can obviously rent the place for at least 1700/month to someone; it's not financially wise for her to give up the equity she has in the house for even less money than she's already getting. There is no way anybody would consider an offer like yours unless it earned them AT LEAST 1700/month....and likely much more.
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