Thanks Mister H http://www.smartmall.biz/?799149

Owner Financing

Generally, this will be a no-brainer if transaction is done in a "traditional" manner. By this, I mean that a document exists that can be shown to lender as evidence of transaction and agreement. It could be a promissory note and deed of trust or mortgage in some states), contract for deed, or similar document.

I think that some investors become more concerned when purchasing property subject to existing financing (Sub2). Since many Sub2 transactions do not have a "traditional" type document that proves purchase, a bit more effort may be needed here.

Depending on language in purchase agreement, this may or may not be an issue. More often than not my sellers are able to prove sale by providing lender a copy of agreement. Since my agreement states that I'm responsible for payments, this will frequently satisfy new lender.

If it doesn't do job by itself, adding a copy of completed HUD-1 Settlement Statement will boost argument. Regardless of fact that I filled HUD-1 out myself, it does evidence fact that a sale took place. Until you know what you're doing, I would recommend allowing title company or closing attorney to complete form for you. If you're buying title insurance on deal, it will most likely be done for you anyway.

If you decide to do it yourself, you can get a fillable PDF copy at link below (under REI Forms). Use a copy of a prior transaction to use as a guide and/or have someone knowledgeable review your work.

http://TexasRealEstateClub.com/links.html

Time for a quick side note here. Some loan officers and real estate investors will offer up suggestion that you either create a "contingency" document at time of purchase or backdate one at time of loan application. Utilizing a document (typically a Contract for Deed) that really plays no part in substance of transaction just for purposes of making it easier for your seller to get another loan is not only unnecessary, but potentially fraudulent.

So, even on a Sub2 transaction which typically involves less documentation and is unfamiliar to almost every party who will be involved in seller's loan process, proving payments are being made shouldn't be a big issue. It may require some additional effort by investor if purchase agreement and HUD-1 are not sufficient proof, but seller can qualify for a new loan and will typically receive full credit for their prior debt payments on property.

One potential risk that I have not run across personally might be if seller somehow ended up at same lender who holds and/or services first loan. Perhaps that would cause some problems, but again, this is easily addressed when having initial DOS discussion.

To summarize, seller can get another loan even after leaving prior one in place and this objection should be a non-issue when discussing acquisition of their property, regardless of which creative technique is used.

Sincerely, Tim Randle

http://TexasRealEstateClub.com

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