Seller Financing Lines

Seller Presentation

"Lines" You Can Use

 

 

1. History: Saxton has been assisting homeowners sell their own homes since 1997. And is one of the US's largest and oldest owner financing purchasing companies.
   

 

1. We use a system that keeps the buyer from shopping homes on homeowners. By controlling the financing, buyers MUST work with you only.
   

   
    

2. I will provide you complete paperwork including the contracts and credit applications to use with buyers. I will walk you through a mock showing and contract signing. I will provide you our Important Classified ad and sign text that is designed to get your phone ringing with buyers that will place a signed contract on your home in just one showing.
   

 

1. I am always a phone call away to answer any questions and help you through the process. I will also assist you on any owner financing processing with Saxton. I will work with the attorney or Title Company to make sure any owner financed transaction goes smoothly.
   

 

1. There is no contract to sign with us and you can just ADD our method to your existing home sale method. There's no risk to you.
   

 

1. We will be setting you up to submit your buyers directly into the funding sources by fax. This is what gives you the right to advertise "Owner will Finance". It is just a matter of faxing in the credit application and credit report provide by the buyer, and the funding sources do the rest.
   

 

1. The sources at Saxton can even help people with credit scores as low as 500 as long as they meet a few common sense requirements… like a job and some rent history.
   

 

Your options:

1. Sell it yourself: You compete with every real estate agent in town; you compete equally with every other for sale by owner in town.
   
2. Buyers will expect you to drop your asking price since you don't have a realtor handling the sale. Buyers look at 14 homes before negotiating and buying a home. So this result in you having to show the home many times and at all times of the day. 70% of people who try to sell it themselves give up within a few weeks and hire a realtor to try and sale the home.
   
3. Realtor listed: You must tie it up for at least 3 months. You hope you get a good salesperson, but can't really know for about 3 months. You are still competing with every other home on the market for the same few buyers. You must pay 6% to the realtor, plus a negotiated price the buyer finally comes agrees to. Typically that is 4-8% below the asking price. This means 10-15% off the appraised price. For every 12 homes on the market this month, only one will sale. It takes an average of 6 months to find a buyer. This method usually involving dropping your price during the first 2 months then negotiating further down from there. This means a 13-20% less than the appraised price. The longer the home is on the market, the harder it is to sell.
   

 

1. Every month that a vacant home stays on the market, it costs an amount equal to the monthly payment and that amount is lost forever. It becomes a cost of selling the home.
   

 

1. Usually, there is no one else in your area that is offering owner financing, this brings you a captive audience of buyers that can't buy anywhere else. They won't try to negotiate the price because they are competing with so many other buyers for the home. They sign an immediate offer for the home because of the competition for an owner financed salutation. The buyers will put up earnest money with their signed offer of between $500.00 and $1,500.00; this allows you to control the sale. (The earnest money is made out to the Title Company (or attorney)).
   

 

What we do is work with you to structure owner financing that we then purchase from you at closing paying you full face value for the financing. Owner financing is what really sells the house quickly. If you can place the words "Owner Will Finance" in your classified ad and on your sign, then you will get a steam of buyers placing offers on your house and out of about a week or two of these offers you should have a buyer that qualifies and can close. We help you with 2 main sources of financing; both an owner carried note situation in which we then buy the note and also through our challenged credit referral sources which specialize in funding very difficult deals.

The buyers come in at a disadvantage in that they need you more than you needing them. This allows you to demand and get full asking price with no negotiation on the price. Our typical owner carried note structure is a 95% loan with a 5% down payment amount. You then sell to us at a 10% discount off the loan's full face value.

 

 

 

 

 

 

 

 

 

 

 

A Great MasterMind Team Can Make you $$$

Everyone needs a team to be successful. I have a team, and everyone that I know who is successful, has a team.

When building a MasterMind Team in the Real Estate Investor Field use these guidelines:

General Questions/Checklist:
For each person you are thinking of adding to your team, ask the following questions (Some team members may have additional specialized questions.):

• Experience
  

1. How much experience do they have in delivering the results you are seeking?
   
2. What experience do they have with specific issues you will have?
   
3. What is the average income and experience of their clientele (Is this your goal?)
   
4. Do they personally have experience in your business?
   
5. Are they at an income level similar to where you want to be?
   

• Education
  

1. Do they have the educational requirements for the job?
   
2. Do the have the professional credentials for this role?
   

• Compensation
  

1. How are they compensated?
   
2. Do they have a vested interest in helping you succeed?
   

• Client Contact
  

1. How do they keep in contact with their clients?
   
2. Is their response time comfortable for you?
   

• Your Needs
  

1. What can this person do to help you meet your goals?
   
2. Are you looking for someone to model?
   
3. Do you expect to be educated by this person?
   
4. If yes to No. 2 or No.3, how would this person do this?
   

   www.paperbiz.com
   

FHA now makes it official… how to use non-traditional credit tradelines

April 29, 2008

 

MORTGAGEE LETTER 2008-11

 

 

TO:        ALL APPROVED MORTGAGEES

 

 

SUBJECT:    Nontraditional Credit Verification and Evaluation

 

 

The Federal Housing Administration (FHA) has long permitted mortgage lenders to establish a borrower's credit history through nontraditional means, including the compilation of performance on rental payments; utility bills; telephone and cellular phone services; cable television service; payments to local stores, etc. This is further described in handbook HUD-4155.1 REV-5, paragraphs 2-3 and 2-4B.

 

This practice is appropriate when the borrower has insufficient trade lines with Equifax, Experian, or TransUnion and a credit bureau score cannot be derived. Mortgage lenders also may use nontraditional credit verification to augment "thin-file" credit reports where a credit score was generated but based on only a few trade lines. However, nontraditional credit reports may not be used to enhance any poor credit history on a traditional credit report.

 

This mortgagee letter provides guidance to lenders and underwriters for establishing and evaluating nontraditional credit histories and also describes FHA's acceptance of those enterprises that can develop a verifiable credit history, no less than 12 months in duration, for borrowers with limited traditional credit. This guidance is effective immediately but must be considered for borrowers without traditional credit beginning with case numbers assigned 30 or more days after the date of this mortgage letter.

 

Nontraditional Credit—Basic Guidance

 

The following provides guidance in establishing that a borrower has sufficient credit references for evaluating bill paying habits, which include: three (3) credit references, including at least one from Group I, covering the most recent 12 months activity from date of application. Group I references should be exhausted prior to considering Group II for eligibility purposes, as Group I is considered more indicative of a borrower's future housing payment performance. Borrowers with no Group I trade references will be underwritten using the criteria set forth under "insufficient credit" below.

 

Group I – rental housing payments (subject to independent verification if the borrower is a renter), utility company reference (if not included in the rental housing payment), including gas, electricity, water, land-line home telephone service, cable TV. If the borrower is renting from a family member, request independent documents to prove regularity of payments, such as cancelled checks.

 

Group II – insurance coverage, i.e., medical, auto, life, renter's insurance (not payroll deducted); payment to child care providers – made to a business providing such services; school tuition; retail stores – department, furniture, appliance stores, specialty stores; rent to own – i.e., furniture, appliances; payment of that part of medical bills not covered by insurance; Internet/cell phone services; a documented 12 month history of saving by regular deposits (at least quarterly/non-payroll deducted/no NSF checks reflected), resulting in an increasing balance to the account; automobile leases, or a personal loan from an individual with repayment terms in writing and supported by cancelled checks to document the payments.

 

Verifying Nontraditional Credit

 

We prefer all nontraditional credit references be verified by a credit bureau and reported back to the lender as a nontraditional mortgage credit report (NTMCR) in the same manner as traditional credit references. A NTMCR is designed to assess the credit history of the borrower without the benefit of institutional trade references and should format as traditional references – including creditor's name, date of opening, high credit, current status of the account, required payment, unpaid balance, and a payment history in the delinquency categories of 0x30, 0x60 etc. It should not include subjective statements such as "satisfactory, acceptable, etc."

 

Only if a NTMCR is impractical or such a service is unavailable may a lender choose to obtain independent verification of trade references. Documents confirming the existence for a nontraditional credit provider may include a public record from the state, county, or city records, or other means providing a similar level of objective confirmation. To verify the credit information, lenders must use a published address or telephone number for that creditor and not rely solely on information provided by the applicant. Rental references from management companies with payment history for the most recent 12 months may be used in lieu of 12 months cancelled checks. Credit references may also be developed via independent verification directly to the creditor. If a method is used to verify credit information or rental references other than NTMCR, all references obtained from individuals should be backed up with the most recent 12 months cancelled checks.

 

In addition, FHA has no objection to the use of various service providers now operating that are able to develop a bill payment history, as well as a score by obtaining rental payment history, utility trade-lines, and other common recurring non-reporting bill payments. While we do not endorse any particular service provider, FHA approved lenders may use such services to develop a credit history for borrowers with no or little traditional credit.

 

 

 

 

 

Evaluating Nontraditional Credit

 

The following offers guidance in evaluating borrowers with nontraditional credit histories. A satisfactory credit history, at least 12 months in duration, is to include:

 

• No history of delinquency on rental housing payments
  
• No more than one 30-day delinquency on payments due to other creditors
  
• No collection accounts/court records reporting (other than medical) filed within the past 12 months
  

 

Insufficient Credit

 

The following offers guidance in evaluating borrowers with no credit references, or otherwise having only Group II references. A satisfactory credit history, at least 12 months in duration, is to include:

 

• No more than one 30-day delinquency on payments due to any Group II reference
  
• No collection accounts/court records reporting (other than medical) filed within the past 12 months
  

 

    In addition, for such borrowers, to enhance the likelihood of homeownership sustainability, the following underwriting guidance is being provided:

 

• Qualifying ratios are to be computed only on those occupying the property and obligated on the loan, and may not exceed 31 percent for the payment-to-income ratio and 43 percent for the total debt-to-income ratio. Compensating factors are not applicable for borrowers with insufficient credit references.
  
• Borrowers should have two months of cash reserves following mortgage loan settlement from their own funds (no cash gifts from any source should be counted in the cash reserves for borrowers in this category).
  

 

 

If you have any questions regarding this Mortgagee Letter, call 1-800-CALLFHA.

 

                        Sincerely,

 

 

 

 

                        Brian D. Montgomery

                        Assistant Secretary for Housing-

                         Federal Housing Commissioner

 

Subject-to and Land Trust Insurance Warning

As most of you know, I'm not a big fan of doing these kinds of deals, but there certainly is reason to do them under many situations. I address the methods of doing these kinds of flips in the Member's Training Area. This item is a caution on how you handle the Fire and Hazard Insurance. From my investor friends in Florida who know too well what happens when you go by to pick up the monthly payment in August and the house has floated down the block.

If disaster hits, there is a very real risk that the insurance company will point out to you then that by placing the property in a Trust (or sold via subject-to), legal Title did, in fact vest to a new owner. They will now argue that the existing policy where the previous owner (by name; i.e. John Smith) is mentioned as insured, is no longer valid.
Even though you are mentioned as co-insured, the reasoning is that John Smith is on record as the legal owner, and as Title is no longer in his name, the policy is no longer valid.
So, no check for you dude!

Here is the solution:
The only way to avoid this is to cancel the old policy, then take out a second Landlords Policy, listing as beneficiaries: "Bill Investor, Trustee for the John Smith Family Trust and Beneficiaries ATIMA".
ATIMA stands for As Their Interest May Appear.
You need not add the Lender here, although keep in mind that as your new Policy is the only one that is valid, the Lender will come knocking when a hurricane or fire strikes.

There's some more to it than that, but the lesson is this.
-1- Cancel the Old Policy
-2- Put a New Policy in Place naming the Trust as insured, as it is on Title now.
-3- Set it up in escrow, just like the previous one.
The Lender will be informed by the Insurance Company, and they will set up the paperwork.
As we use the Seller's name in the Trust, the Lender "most likely" will not see any reason to invoke the DOS clause.
We always have the Seller sign a document anyway where they inform the Lender that they have placed their Property in a Trust for Estate Planning purposes, so this should work just fine.

Owner Financing Details

http://www.johnalexanderhome.com/Level2/Updates.html Link to the member's Training Call on how to structure owner carried notes that we will buy at closing. Doc's required etc are taught in the call. Below is a highlight of a typical structure.

Suggested Owner Carried Note Structure:

$300,000 maximum note amount

Down Payment: 5% (can be gifted through Ameridream or other DPA program)

Loan Amount 95%

Term: 30 Year Fixed

No Balloon

Interest Rate: Determined on approval (range 9.9% goes down to 4.5%)

Note purchased at a 13% discount normally

Owner Financing Note Purchase at Closing

Sell quicker and at top price by offering owner financing to your buyers. We then buy the note at closing. Credit scores down to 500. Get all the details on today's Training Call for Level 2 Members.

Fannie Mae Withdraws Declining Market Policy

Fannie Mae just announced a withdrawal of their declining market policy! To quote from Announcement 08-10, "Lenders are no longer required to make a downward adjustment to the LTV, CLTV, or home equity CLTV (HCLTV) based on the location of the property." Per Fannie Mae Announcement 08-10, dated May 16, 2008:

1. Fannie Mae withdraws their declining market policy effective 6-1-08;
   
2. Declining market policy is replaced by a "National Down Payment' policy which reduces maximum allowable LTVs for 1-unit primary residences;
   
3. 95% is the maximum LTV, CLTV, HCLTV for manually underwritten loans;
   
4. 97% is the maximum LTV, CLTV, HCLTV for DU underwritten loans, including MyCommunityMortgages® and Flex mortgages;
   
5. CLTV of 105% with Community Seconds® is still allowed;
   
6. Effective date is for applications taken on or after June 1, 2008.