Today, I looked at a gorgeous 5 bedroom, 4 bath, 3500 square foot house in an upscale neighborhood of South Orange County, CA. The fair market value of the house is around $1.1 million and the seller currently owes about $1.4 on it. Its in a very desirable area so I would expect the price to evenually climb much higher.

The seller is looking for a $110,000 downpayment and we would immediately become a 50% owner and be responsible for a $550,000 mortgage balance. The seller is paying $6000 on his $1.4 mortgage and our allocable share would be $2200 (the seller would be responsible for $850000). He is asking for a rental payment of $1750, so the total monthly payment would be $3950.

I have bought homes in the past with stated income loans, but financing is getting much harder to get and we'd never be able to qualify for this on our own. Would the lender need to qualify us for this, or could they call the loan if they found out the seller did this? What are some of the traps and does this sound like a good deal?