Seller Financing – what docs need to be provide at closing?
I am working a small condo deal and we are going to offer seller financing, what docs need to be included with the mortgage package?
TIL
Good Faith Estimate
HUD 1 Settlement
What else?
~Thank you.
It is just like anything else you purchase, you draw up a contract between the two of you outlining the responsibilities of each.
Make sure the cost of the house is included, the interest rate if there will be any, the time in which the mortgage loan will be due, how much is expected each month from the buyers as a monthly mortgage payment, any late fees being charged for not making the mortgage payment on time, don’t forget to subtract any down payment from the selling price if there is a down payment.
Take this document to a escrow closing agent when signed by both the sellers and buyers.
The escrow closing agent will then prepare the escrow instructions and open a title at a local title company. You and the seller will be required to sign the escrow instructions based on the contract you provide to the escrow company.
This is the way the escrow company would do if you had a real estate agent or lawyer draw up the contract.
The escrow and title company will take care of the legal things that need to be accomplish to include drawing up the appropriate deeds and mortgage note to be signed by the sellers.
The title company will make sure you have a note and deed of trust in your favor for the buyer to sign prior to closing. You should keep this note in a safe place as it is proof that they are obligated to you for a certain period of time or until the new buyers refinance the property.
If there are things that need to be legally done by you and the sellers the title and escrow company will make sure they are done prior to closing.
After opening the escrow the escrow officer will be able to prepare both you the seller and buyer an estimated HUD-1 statement indicating the approximate cost of this real estate transaction..
When the escrow finally close the escrow closing agent will then issue both you and the seller a final HUD-1 indicating actual fees and any other cost that was paid though this real estate transaction.
When the escrow close and the deed are transferred by the title to you and recorded at the county court recorder’s office then the house belongs to your buyer.
They should pay the mortgage to you by personal check. They should retain these checks or bank statements for a minimum of 1-2 years this will prove they made the monthly mortgage each month will be able to refinance the mortgage with a normal mortgage company. They should make sure the check made to you are annotated "Mortgage Payment" This becomes proof that they are making the monthly payment along with the contract you drew up and recorded with your buyer.
Failure on their part to make the monthly mortgage payments to you as agreed is cause for you to foreclose on them as would any bank that they borrowed money from to purchase a house.
You may select any escrow and title company you desire, just remember that these two companies charge a fee for their service, so make sure you find out this cost when you first make contact with them.
You and the buyer will be required to pro rate the taxes and insurance make sure you find the cost of these two also. The escrow and title company would be helpful in giving you an estimate of the cost of these two.
If you want the buyer to sign a complete set of loan docs to include the disclosures you indicated above, you would have to get a doc company to prepare the loan docs based on the interest rate, the terms of the mortgage (How long (number of years) you will be carrying the mortgage loan)
One such company is called Doc Magic. You may google them on the internet. They will charge a few for their services.
I hope this has been of some benefit to you, good luck.
"FIGHT ON"
You must provide a mortgage or trust deed and note depending on what state you live in. Normally escrow does these for you.