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    plack's Avatar
    plack Posts: 1, Reputation: 1
    New Member

    May 12, 2008, 09:11 AM
    Contract for Deed Purchaser
    My husband and I currently are under a "contract for deed" loan in Texas. Our names are not on the title but we are on contract for deed. We are wanting to refinance the loan with an FHA loan. Some lenders are telling me we cannot do this and others say yes we can. Can we get a new FHA refinance loan if we are currently purchasing under a contract for deed> we are 4 years in to contract for deed loan.
    Dr D's Avatar
    Dr D Posts: 698, Reputation: 127
    Senior Member

    May 12, 2008, 11:22 AM
    The answer is YES. Per MRI sec 606.05: "If the borrower will use the loan to complete payment on a land contract, contract for deed, or other similar type financing arrangement in which the borrower does not have title to the property --the new mortgage may be processed as either a purchase or a refinance transaction with maximum FHA - insured financing if the borrower receives no cash at closing. If all loan proceeds are used to pay the outstanding balance on the land contract and eligible repairs, renovations, etc., the appropriate LTV ratio is applied to the lesser of:
    * The appraised value, or
    * The total cost to acquire the property (the original purchase price, plus any documented costs the purchaser incurs for rehabilitation, repairs, renovation, or weatherization), plus allowable closing costs and, if treated as a refinance, reasonable discount points.

    Equity in the property (original sale price minus the amount owed) may be used for the borrower's entire cash investment. However, if the borrower receives more than $250 cash at closing, the loan is limited to 85% of the sum of the appraised value and allowable closing costs. Replenishment of the borrower's own cash expenditures for repairs, improvements, renovations, etc., is not considered as "cash back" -- provided the borrower can substantiate, with cancelled checks and paid receipts, all out-of-pocket funds spent for these purposes."

    My MRI reference book is not the latest available, but I believe these rules are still in effect. Good luck.:)

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