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209 Fast Spare Time ays to Build Zero Cash - Tyler T.H.

Tyler T.H. 209 Fast Spare Time ays to Build Zero Cash - John Wiley & Sons, 2004. - 290 p.
ISBN 0-471-46499-6
Download (direct link): sparetimewaystobuildzero2004.pdf
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Creative Financing of Your Real Estate Fortune
151
Option to Purchase Real Estate
Date:___________________
In consideration of the amount of $100.00 (one hundred dollars and no cents), John and Jane Doe (the optioners) hereby grant Mary and Edward Smith (the optionees) the exclusive right to purchase the property at 123 Main Street, Anytown, US 12345 for the next 90 (ninety) days from the date above, at a price of $100,000.00 (one hundred thousand dollars and no cents). During this time the optionees are free to sell the above-named property to anyone of their choice, provided they satisfy the terms of this option in full.
This option covers the entire agreement between the abovenamed parties and no other understandings, written or oral, are in force. In the event of disagreements, this option will be subject to the laws of the State of____________________.
Agreed:
Optioners:___________________________
Optionees:___________________________
Figure 7.1 Example of a Real Estate Option (Note: Any option you use MUST be prepared by a competent qualified real estate attorney.)
And most sellers will accept you as you are. They won’t “pull a credit report” on you if they feel you’re a “good guy or gal.” So you’re into an income property without a credit check of any kind. Steps to take are:
• Get the seller to take a Purchase Money (PM) mortgage for the
down payment if you don’t have the cash needed for it.
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Chapter 7
• The Purchase Money Mortgage becomes your assumable mortgage because there are no credit checks associated with the takeover loan.
• Your seller—in effect—becomes your assumable-loan lender.
A reader writes:
Purchase Money Mortgage for Zero-Cash Takeover
“In three days we are closing a deal on an 11-unit apartment building. We easily got a first mortgage. For the balance we got a Purchase Money Mortgage (from the seller.) So we did not have to put any money into the deal to get the property.”
—Michigan
Properties financed by the Veterans Administration (VA) can have assumable first mortgages. So check foreclosures offered by the VA because you can often get into a single-family home with no credit check and no qualifying requirements. You’ll find VA foreclosures at www.va.gov.
When you combine an assumable first mortgage with a PM mortgage you have a true zero-down deal. In addition, there usually are NO credit checks of any kind with either type of assumable mortgage!
For example, a reader writes:
Sellers Respect Your Experience
“Enclosed is information on the two apartment buildings I mentioned to you on the telephone the other night. The sellers said they would finance the entire sale for someone who has experience in running rental property. Fortunately, I have eight units, thanks to the information I got from reading one of your real estate books. The owners aren’t
Creative Financing of Your Real Estate Fortune
153
concerned with the terms. They’ll work all of that out with a competent buyer.” —Oklahoma
Assumable Mortgage Possibilities for You
When you think of an assumable mortgage, think in terms of two possibilities, namely:
• An assumable First Mortgage for anywhere from 75 to 90 percent of the purchase price of the property. With a motivated seller, you might even get a 100 percent mortgage—giving you a zero-cash deal.
• An assumable Purchase Money Mortgage for anywhere from 10 to 25 percent of the purchase price of the property.
There’s more good news for you on assumable mortgages, namely:
• The lender cannot raise the interest rate on any mortgage you assume. Thus, the rate the seller is paying on the mortgage will be the rate you will pay.
• The lender cannot refuse to allow you to assume the mortgage,
if the seller wants you to assume it, unless there’s a Due-on-Sale Clause in the mortgage. Such a clause requires that the mortgage be paid in full if the property is sold by the current mortgage holder—the seller.
• The lender may omit a Due-on-Sale Clause from an Adjustable Rate Mortgage (called ARM for short). So look for sellers having an ARM on the property you want to buy. (As an aside, let me say that life insurance companies seldom have a Due-on-Sale Clause in their mortgages for smaller properties. So when you learn that the mortgage on a property you’re interested in is held by a life insurance company, rejoice! It probably does not have a Due-on-Sale Clause.)
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Chapter 7
One final note: FHA and VA loans made prior to December 1, 1986, did not have a Due-on-Sale Clause in the mortgage. So if you’re looking at a property having such a mortgage, you know there’s no Due-on-Sale Clause to deal with. After December 15, 1989, all FHA mortgages have the Due-on-Sale Clause in them. Keep this in mind when you look at a property to buy.
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