I have a question about current deal I am working on. I am buying a property on Land Contract, and am buying it with equity. My plan is to buy the property on Land Contract, and then refinance out as soon as possible to pull as much equity out as I can. From what I understand, when a bank does a REFINANCE, they lend up to 75% of the VALUE, rather than the COST, allowing me to avoid a 25% down payment, and making it possible to pull equity out.
Should I file the Land Contract with the Register of Deeds?
Is there a "seasoning period"?
Should there be any problems that come up in this strategy?
I am curious as to if anyone has done this before, and how the process worked?
@Kole Kingslien Guidelines for land contract:-
Payoff of Installment Land Contract Requirements
When the proceeds of a mortgage loan are used to pay off the outstanding balance on an
installment land contract (also known as contract or bond for deed) that was executed within the
12 months preceding the date of the loan application, Fannie Mae will consider the mortgage
loan to be a purchase money mortgage loan.
The LTV ratio for the mortgage loan must be determined by dividing the new loan amount by the
lesser of the total acquisition cost (defined as the purchase price indicated in the land contract,
plus any costs the purchaser incurs for rehabilitation, renovation, or energy conservation
improvements) or the appraised value of the property at the time the new mortgage loan is
closed. The expenditures included in the total acquisition cost must be fully documented by the
When the installment land contract was executed more than 12 months before the date of the
loan application, Fannie Mae will consider the mortgage loan to be a limited cash-out refinance.
In this case, the LTV ratio for the mortgage loan must be determined by dividing the new loan
amount by the appraised value of the property at the time the new mortgage loan is closed.
Cash-out refinance transactions involving installment land contracts are not eligible for delivery.
@Kole Kingslien - make sure you or your corporate entity are on the title, otherwise you will have no seasoning and when you go to refinance, the lender will treat it as a purchase.
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