If so, how?
I don’t understand how this works, but it seems like I am missing something. When looking on craigslist in Los Angeles for apt/house’s to rent, you get tons of listings for “take over the mortgage before the bank forcloses” types of houses, most of them 3 bed 2 bath at least, many of them for *significantly *less than my rent for my one bedroom apartment. Why isn’t everyone just ditching their apartments for less expensive houses.
What am I missing here?
Linkso you know what I am talking about.
It is one method to purchase a home. Get some professsional help with pit falls.
It can be done one way. Present owner signs over the house with a quit claim deed. New owner brings the loan up to date and makes monthly payments. In time the new owner refinances the house with a new loan in their name.
Problems, what other leans are on the property. What kind of loan is on the property. Front money is sometimes required to bring mortage up to date. Also if the monthly payment is low then the loan should be low, why can’t the present owner sell the property and clear the loan?
Sometime they can be a great deal some times not. That is why I would not fo it without a pro to help.
I asked my father,. a real estate broker in NJ about this a year ago. Find your own broker, this is not any kind of advice, etc., but he said that the bank is under no obligation to refinance, esp. on terms that are favorable to you. And when they say no, you are going to be needing to find your own mortgage, large enough to pay off the bank today instead of 300/month or whatever. Unlike when this original mortgage was written (unlikely by the bank holding it now), any bank you get a mortgage from is going to be interested in the details of what you put in the application.
Either that or you will move in and get kicked out when the house is foreclosed on anyway.
Or something like that.
I’m not sure of the details of that one, but 28 years ago, during the period of high inflation, assumable mortgages were very common. If someone had a 5% mortgage on the house, he could find more buyers by letting a buyer assume it rather than getting a 12% one. We actually financed the guy who bought our house in this way, and made some money on it, since he paid more than we did. (It wasn’t a bank mortgage, btw.)
I assume the reason to do it now is because it might be hard for a buyer to get a mortgage, even with good credit. But I wouldn’t go near this without a good real estate lawyer.
ISTM that these listings are for pre-foreclosures where the owner wants the loan out of his name ASAP so his credit isn’t too wrecked to get another place to live.
There is also apparently a cottage industry of “mortgage” or “foreclosure advisors” who are essentially matching up investors with people whose homes are in pre-foreclosure. The premise is that the investors take over the mortgage and the current owners become tenants paying rent to the landlord. Which is fine as far as it goes, but I haven’t encountered anything about this except spam and some questionable sales tactics.
Assumable mortgages USED to be fairly common, but lenders have tightened up on the practice. It may be that you can actually take over the mortgage, like Snnipe says, or it could be that the lender will simply call in the loan, as not_alice points out.
It’s also a favorite scam of those “No money down!” real estate infomercials.
Don’t sign anything without a lawyer and a bunch of written agreements from the seller and the lender.
I assumed my mortgage 20+ years ago because I was young and could not qualify, being self employed. Paid the previous owners $5000 for their equity and moved in. It was a VHA (veterans loan) and I was never even in the military. No qualifying, just lawyer fees and points/closing costs.
If the mortgage is at all in arrears, I wouldn’t touch it with a 10 foot pole, without permission from the mortgage company.
Pretty much any mortgage comes with a “due on sale” clause which is sure to be triggered when the seller quitclaims the place to you.
Now, if it hasn’t been past due, and you (as buyer) keep making the payments, it’s possible the mortgage company either wouldn’t ever twig to the change, or would but wouldn’t care (especially if it’s an area where they’re dealing with other foreclosures - they’d be happy to have your payments coming in steady-like).
But there’s a pretty high degree of risk on both sides (for the seller, what if you take over, then quit making payments - who’s the mortgage company going to come after? the guy on the paperwork!).
A true loan assumption is a rare thing these days. I’ve heard that FHA etc. loans are usually assumable but most commercial ones aren’t.
Given how low mortgage rates currently are, assuming an existing loan probably does not make economic sense anyway, unless it’s somehow a way of getting around a history of bad credit.