Non Qualifying Assumption - Posted by jay

Posted by JPiper on December 14, 2000 at 15:46:07:

Originally you said you had a non-qualifying assumption. So that we’re on the same page, this means that in the case of FHA the loan was originated prior to 12/15/89, if memory serves. VA loans are prior to 03/01/88.

The buyer can either formally assume these loans OR do a simple assumption (non-qualifying). If the buyer formally assumes then you get a release of liability, if not, then you remain liable for 5 years.

Understand that sometimes the lender is not clear on these rules, and therefore the assumption department “assumes” that the loan MUST be formally assumed. For pre-1989 loans there are two different assumption packages.

You can sell with a simple assumption, but the ongoing liability is an issue (at least with me). To take care of this I will carry a second which gives me a way back into the property if the buyer defaults on the FHA loan.

I might consider a reduced buy-out on the second IF the buyer does the streamline process I mentioned in my earlier post, which will pay off the old loan thereby taking you off the hook in terms of liability.

Selling this way you can generally sell for a higher price…because the loan is non-qualifying and the streamline is non-qualifying as well.

Again though, if your loan is post 1989 then the rules of the simple assumption don’t apply. The loan must be formally assumed with the lender.


Non Qualifying Assumption - Posted by jay

Posted by jay on December 13, 2000 at 17:56:34:

The house that I have can be assumed without qualifying, I have a interested party who will have my downpayment I’m asking for to assume the loan. My question is, how do I get the ball rolling as far as the paperwork involved??

Re: Non Qualifying Assumption - Posted by JPiper

Posted by JPiper on December 13, 2000 at 19:10:57:

You could call the lender and get the assumption package for this type of loan. Or, you could take your deal to a title company and let them do the paperwork. Their first step will be to call the lender to get the assumption package.


A few pointers - Posted by J Box

Posted by J Box on December 13, 2000 at 23:03:39:

Put the property into a trust and let the trust assume the loan.

Treat your buyer right! Let him take title safely, and with dignity!

Send them flowers after the purchase, and call them every 2-3 days to make sure everything is to there satisfaction. If not , then do what it takes to make them happy. (I mean whatever it takes) be it new carpeting, paint, a roof, you name it (Just do it)

Word will travel on you being a good guy.

J Box

Just "By-Pass the lender! - Posted by Gary S

Posted by Gary S on December 13, 2000 at 22:56:37:

Take the property from the owner via “SUBJECT TO” purchase!

Why do you insist on going through these lenders?

Gary S

Re: A few pointers - Posted by JohnBoy

Posted by JohnBoy on December 14, 2000 at 01:29:40:

Hey, that sounds like a great idea! You got any houses I can buy from you???

Re: Just "By-Pass the lender! - Posted by jay

Posted by jay on December 14, 2000 at 14:07:44:

Gary, I’m the owner.

Re: Just "By-Pass the lender! - Posted by JPiper

Posted by JPiper on December 13, 2000 at 23:45:06:

Actually, there are some reasons for going through the lender for the buyer, and perhaps for the seller on a non-qualifying assumption.

For the buyer, assuming the loan non-qualifying means that after timely payments for 6 months he then qualifies to participate in the “streamline program” (assuming the loan is an FHA loan). As you undoubtedly know, these old FHA loans for the most part have high interest rates. The “streamline program” allows the buyer to refinance at the prevailing rate (probably lower than the existing rate) WITHOUT QUALIFYING.

For the seller, when this buyer “streamlines refinances” this loan, the old non-qualifying loan is paid off…thereby eliminating ANY future liability concerning the loan. As you undoubtedly know, a seller selling on a non-qualifying basis retains an ongoing secondary liability for the loan for 5 years. That liability ends with a streamline refinance.

As I read the initial post, the poster was the Seller. I can think of NO reason he would want to sell on a subject to basis. Can you? I can think of a reason he might want to sell on a basis where the buyer could streamline refinance. Let’s just say the program might well enable him to sell for more money.

Nevertheless, if I were the buyer I would rather assume and then streamline…lowering my payment. Wouldn’t you? Or are you that afraid of your liability?


Re: Just "By-Pass the lender! - Posted by jay

Posted by jay on December 14, 2000 at 14:13:20:

JPIPER, I called my lender for the assumption package, which they will send me promptly. They also said that my buyer would have to qualify, therefore relieving me of liability.

I had NO idea… - Posted by SusanL.–FL

Posted by SusanL.–FL on December 14, 2000 at 09:21:18:

that there was a 5-year liability attached to these loans!

Just learned something new.

Thanx Jim!

Re: Just "By-Pass the lender! - Posted by JohnBoy

Posted by JohnBoy on December 14, 2000 at 01:27:43:

If liability is a concern then taking a loan over “subject to” isn’t going to solve that problem. He may not be liable to the lender, but he’s sure as heck going to be liable to the seller for paying off his loan. That bank may not be able to go after him, but the seller can sue him if he defaulted.

So if he’s worried about being liable to a lender for signing a loan with them, then I would think long and hard before just jumping in and doing “subject to” deals! He’s still going to be liable to someone for paying off the loan! :wink: