Hi everyone! I'm new to real estate investing so I have what might be a newbie question. So I have a friend who wants to sell his home pretty soon. The house was purchased in 2009 for around $20K - $40K less than what it is worth now. Would it be possible for me to 1) take over his loan, and then 2) refinance immediately or would I have to wait to refinance and how much time would I need to wait? Thanks!
Hey @Ross K. Welcome to the forums! This might actually be a great opportunity if you can make it cashflow. Let me try to answer your questions.
In order to take over his loan, you will want to buy the house "subject to" the existing financing. This is referred to as buying "subject to". The P&S will be written up as such and you will take over the payments. Most loans have a "due on sale" clause, but this is simply an option the bank has, not a requirement. STILL it is better to be discrete when calling the bank. Simply tell them that you are now making the payments and everything should be forwarded to you. Short and sweet and 99% of the time thats all it takes.
As far as refinancing goes, you will need to wait at least 6 months to age the deed in your name. If the house i under water you may have some trouble re-financing it immediately, but there shouldn't be any rush to refi, unless your buddy needs to decrease his DTI to buy something else.
The difference between a good deal and a bad deal are the numbers.
Make sure the numbers work!
In order to be able to refinance this home you'll need to do two things.
Add yourself to title
Pay the mortgage for at least 6 months and prove this with cancelled checks.
However Texes has some strict rules about cash out refinances so if you're going to do this make sure you do some research. Make sure that the bank is participating in Texas Equity ( a ) ( 6 ) and go from there.
If you want cash out the other option is to get a HML ( Hard Money Loan ) and then turn around the day after and do a conventional loan Rate & Term.
Oh and like Gualter said make sure the numbers work.
Keep us posted and I wish you luck and Welcome as well.
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