I have some renters that are wanting to purchase a house that they are currently living in. It is my house that I still owe on. they are friends and have been renting for two years. the perfect renters cause they never call and deposit the check every month in my account. they have done upgrades on the house and yard. they were about to get a loan from a company and they company backed out. they have bad credit because of past marriages. is there any way for me to do a rent to own or anything of that nature to them where they can pay insurance and I just keep using there payment to pay the mortgage I owe on it? I am really lost on this subject.. should they just be renters only? I figured they were keeping it up thinking it was going to be theirs. what about something like a balloon note, I have had that mentioned to me but know nothing about it. advice appreciated.

No way I'd do this sort of business with friends. Especially friends with crappy credit. They are blaming their bad credit on their exes, but I can assure you that's unlikely.
If they can't get a loan from a bank, they dang sure don't deserve one. Even in this "tight" credit market its still pretty easy to get a mortgage, which means you should run.

You have two options:
1. Let them keep renting, only renting.
2. Let them get a loan from a bank and let the bank deal with the payments, and you get the full amount at closing.

Usually on a lease/rent to own contract you the owner will get them to sign a contract stating that is their intent. And it I Usually a 30-40% return on investment. IE they pay $1000 a month $300 of each monthly payment goes toward the principle on the house at the price you agreed on

How the hell is not being able to get a loan, mean someone don't deserve one?? When I was 24 years old, I borrowed money, ALOT of it, to build my Dairy, and buy my farm.. You think my "credit" was good enough for big $$$ at that age.. No, the bank president was a friend of mine, and knew me. Went out on a limb, and I haven't missed a payment yet. That post struck a nerve on me!!!!!

To the OP, from what you said about your friend, I wouldn't hesitate a bit, to have a contract drawn up, they keep paying rent on it, until a certain amount is reached and then it's theirs.. IMO

Yep...true friends are hard to come by. If they are "True" friends, help them out if they need it and you are willing. Just protect yourself.

Loans are based on statistics. Nothing more. The average 24 year old can't handle a big loan because they may not have a good job, etc. Heck I couldn't even get a dang credit card, much less a house.
They don't assess character. The fact that you knew the president means they could take this into account.
My reason for posting what I did, is that when they don't pay, you'll have to be the bad guy and could lose a friendship over it.

I would suggest lending tree. They will loan money to monkey. May be high interest but they will find someone.

If they are friends make them run away from a balloon note.

Go speak with a lawyer on how or if y'all should do this. I think it sounds like a win/win, but get the lawyers advice.

You really can't "assure" anything.

It's not unusual at all for a divorced couple's credit to be shot, especially if the divorced couple was a two income family that required both incomes to make a house payment. The couple splits up, one of them ends up with the house, with no way to successfully pay for it....guess what? A foreclosure hits BOTH of their credit.

Remember...a divorce decree in no way, shape, or form legally releases you from joint debt. The ONLY way to get out from under a mortgage (or any other joint credit/debt, for that matter) is for the asset to be completely refinanced in only one of the couple's name, thereby releasing the other from the debt. Otherwise both individuals are on the hook for the debt until it is paid off....or in case of default, it hits both individuals' credit.

As metioned aboce, Lending Tree lend to a blind duck strung out on crack.

That being said,a lease purchase can help you both

$50,000 house (example)
10% down and 10% interest for 5-8 years.

You make a good profit on your investment and retain the deed.
If they flake out, you have their cash and the deed.

Call a real estate attorney. It is done quite often. Usually involves a certain number of payments that are applied to the down payment after so many years. It is called a lease purchase.
There are tax ramifications due to the interest deduction. Also you would need to check with your lender as to whether it would be a violation of your mortgage.
A real estate attorney can give you valuable advise and save you money in the long run. I do not do real estate work much or I would be glad to talk with you for no charge to get you on the right track.

I'd let them keep making upgrades and paying rent. If they get all butthurt about all the work they've been doing for free, only then would I even think about appeasing them. Until then, let it ride. You're making more money by letting them rent. I was told by my granddaddy "Treat all tenants equally. Like schit"

I didn't realize my advice would be received with such vitriol. Just my opinion.
I said it was unlikely. If each relationship only has one bad partner (50%) and you combine two of those folks, that's only a 25% chance that your new tenants are not the "bad" exes. Not where I'd put my money.
Anybody ever met anyone that said "yeah I got divorced because I was batshit crazy. My ex was really good with money and a great person, she's better off without me".

I haven't either. Just sayin.

They have more to lose than you do, really. God forbid, if you get sued have massive medical bill, etc... and creditors come after you, they can take the house and the occupants will lose out. I'd just make sure you have a good contract and agreement drawn up, giving them "X" time to obtain a loan and buy you out. Like BGH said, if they jump up and leave, you still have the house. Personally, I wouldn't have rented to friends to begin with but that's neither here nor there.

You took that response as vitriol (cruel and bitter criticism)?

I think we're having two slightly different conversations here. You stated that it's unlikely that someone's bad credit could be caused by their ex. I simply explained how it's not unusual at all for one's credit to be negatively affected by divorce. Now, you're speculating on WHY people get divorced.

It's up to the OP to determine whether it's worth the risk. He stated they are "friends". I would guess that to mean that he knows their history.

Look at it as a car dealership. Your offer is equal to:

"Buy Here! Pay Here! No money down! Slow Credit, Bad credit, No Credit!"


Those guys usually have a good repo man in-house.

Exactly. What they really mean is "pay about half of it off and miss a payment and we're going to come get that Shiite and sell it again for what you paid for it."

I meant it more in the way of people miss payments a lot on those deals.

You're right. I think we mainly agree. I just think things can go south quick even when friends are involved with large asset purchases. I think we can agree it could be tricky, but hopefully it all works out and everyone is happy.

They will have a stake in the house as a purchaser. IMO, this makes it more difficult to take back control of the property should they not pay. Easier to evict a renter rather than foreclose. If you value your friendship don't do a lease purchase. Keep renting until they can get a loan or move out.