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From: ken@ihuxq.UUCP (ken perlow)
Newsgroups: net.legal
Subject: Re: Mortgages
Message-ID: <926@ihuxq.UUCP>
Date: Tue, 15-May-84 00:43:49 EDT
Article-I.D.: ihuxq.926
Posted: Tue May 15 00:43:49 1984
Date-Received: Wed, 9-May-84 07:36:57 EDT
References: <649@ihuxb.UUCP>
Organization: AT&T Bell Labs, Naperville, IL
Lines: 46

--
>> Is it legal to do the following when buying a house.

>> The buyer and seller agree at a price of $50,000 (for instance).
>> The buyer needs to come up with 10,000 for down payment/points/etc.
>> but only has 5,000.  Can the seller give(lend or whatever you want to
>> call it) the buyer 5,000 to meet the down payment and sell the house
>> for 55,000??  The mortgage would be higher but the buyer can get the
>> house with out a lot of down payment money.  (the seller would recoupe
>> the 5,000 when the buyer would get the loan.)  Is this legal and if
>> so what problems can crop up??

The problem is getting financing.  When you get a mortgage, most banks
require you to tell them whether you will borrow any of your down
payment.  Your answer, unless you are worth millions, only just now
happen to be, ah, a little cash-short, will probably make a big
difference in their answer.  Also, the seller doesn't see your down
payment, only the bank does.  It just pays the seller (and/or yet
another bank that holds the seller's mortgage).  Now, you could work out
a very under-the-table deal on that $5000.  That's fraud, of course.

Why $10,000?  There used to be FHA loans available for 90%, even 95%
of purchase price.  Check with a mortgage company.

Will the seller offer a land contract?  (That's where the seller
offers the financing for some period, after which the rest is paid or
seller gets the house back.)  A 3 to 5 year LC should put you in
the driver's seat in a rising real estate market, as when the contract
comes due, although you'll have paid down only a few bucks of the
principal, the house will have appreciated to the point that the
ratio of (what you must pay off)/(what it's worth) will be small enough
that a bank should lend you the money.  Never take a LC less than 3 years.

But why do it alone?  Find 1 or more persons in the same straits, and
you'll have the money you need.  I ran a housing co-operative back
before I sold out, got a more communal lifestyle in my blood, but
you can co-buy 2 and 3 unit buildings, or a large house you can
convert to apartments, and live your piece of the American dream by
yourself.  As Mr. Spock himself said, "There are always options."
-- 
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JE MAINTIENDRAI   ***** *****
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