what is the best way to handle a for sale by owner purchase? I am interested in buying an investment home using bank financing which I am sur the bank has certain requirements that need to be met before lebdibg tbe funds. What are these requirements? What steps do I need to take to make sure I am covering the important factors in getting the home at a good deal without anything coming up after purchasing?
Are you planning to buy from somebody who is marketing the house FSBO? If you don't have a lot of experience buying/selling, you may want to reach out to a closing attorney and/or a real estate agent and consult with them (i.e. pay them hourly to walk you through the process). Make sure if you do contact a RE agent that you let them know up front that you want to pay them a fee for services and not include them on the sale for a commission (this is what most FSBO sellers are trying to avoid).
I am buying straight from the owner. No representation on either side. Could the closing attorney the bank uses for closing be used to help facilitate & understand the process?
A FSBO isn't really much different than any other purchase. Just no agents involved. It doesn't affect the banks requirements.
Banks have three basic requirements for an investment loan:
1) credit score. Exact requirements vary, but 720+ should be OK
2) cash. You will need at least 20% down, though I spoke with a lender a couple weeks ago who said 15% was possible, but with PMI. And you will need cash reserves. Six months PITI for the new property, two months for existing properties as long as you're below four mortgaged properties. For 5-10 mortgages properties its six months PITI for all properties.
3) income. You will need to have income to support the loan. Rental income will only be included if you have two years landlording experience.
Details vary, and you may find a lender more flexible than these requirements.
As far as the property, value is key. You don't want to pay above market just because its a FSBO. The lender will require an appraisal, so that will give you confidence you're not over paying.
As far as profitability, that's just a matter of math using the price you're paying, the loan terms and the rent.
Does the bank require an inspection also, or will that be done during the apprasial to uncover any issues?
An inspection and appraisal are almost certainly required and maybe a survey too. Where do you get your title insurance from in NC, a title company?
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