Posted by DaveD (WI) on February 03, 2004 at 14:38:44:
At this point, we are speaking academically and tossing theory around. You’re still missing the larger point. First, they won’t do it. It comes down to policies, freddy mac underwriting, secondary markets, etc. etc. That said, it takes just as much effort and dollars to qualify to take over a loan as it does to qualify to get your own fresh financing. Why then, would you even mess around with the seller’s lender (which will be different every time) when you would be better off structuring your own financing with your own same lender every time?
BTW, if you are worrying about sellers being amenable to your assumtion idea, vs. some other way, then you are sitting yourself in front of unmotivated ones who won’t sell to you anyway. A little better job of prequalifying them should fix that for you. Good luck.
Posted by Brian-MA on February 03, 2004 at 12:39:20:
I read alot about subject-to deals on this board. Here is a question: If I have better credit and more income than the seller of a property why would the bank object to officially signing the mortgage over to me? Is this a good way to structure a deal? I feel that it would be a lot more comforting to the seller this way and may lead to better terms for me.
Re: taking over a mortgage - Posted by KC Questions
Posted by KC Questions on February 03, 2004 at 14:21:23:
Here are a few reasons off the top of my head.
It might cost money to get a mortgage “officially” transferred over to you.
You need to limit your potential losses.
It helps to keep your property ownership private. After all, anyone can go to the courthouse and see who a mortgage was made out to.
If the bank did allow the mortgage to be signed over to you, depending on the how the paperwork is done, the sellers might still be liable for the loan.
Some people with good credit and income have reported getting declined for mortgages just because they already have 9 or 10 mortgages showing on their credit report. They exact number varies depending on which lender they were using.
Posted by DaveD (WI) on February 03, 2004 at 13:22:15:
Brian, it isn’t about what the bank wants. It is about what the seller wants (you to buy his house) and what makes good business sense for you. You are missing the larger point.
Being that most S2 candidates are a low equity situation why on earth would you want to be personally on the line for a bunch of loans at 98% LTV? Would that be more comforting to the seller? You bet! Does it make economic sense for you? Absolutely not! Incidently, the bank won’t just sign it over to you, they will expect you to fully qualify. That means applications, credit reports, etc. Then they will monthly report your payment history. Then you are going to turn around and put a tenant into your house with their sucky credit? Please!
Qualifying for a loan is something you need to hold in reserve (like when you buy a house for 49 cents on the dollar) so don’t waste it on a no equity deal. Do you want to be an average broke investor, or an exceptional one? (Hint: Broke investors pay 98% of retail, while signing personally for the loan.)
Posted by Brian-MA on February 03, 2004 at 13:35:15:
Dave,
I appreciate the response, but I’m not sure why you assume that I will be paying 98% of MV. House prices have been increasing at an average rate of 10%/year in MA. Anyone that got a traditional bank loan (10% down) and owned the house for a year probably has about 20% equity already. If I could assume the loan for no money down and sell it at a 10-15% profit, I would be satisfied. It may not be a ton of money, but there are alot of opportunities like that out there. If I am missing something here let please let me know.
Posted by DaveD (WI) on February 03, 2004 at 13:59:17:
If you have hung around here for any length of time you know the prevailing wisdom is to make your profit on the buy. What you are doing is speculation. Some of us call it selling on the greater fool theory. It may well work, Brian, but you shouldn’t confuse it with investing. That said, if you are going to speculate, why wouldn’t you drive all the risk out of it by leaving your name off the loan?
Traditional bank loans these days are something like almost nothing down, with closing costs folded in, since money is loose. That’s why I say 98% LTV.
No institutional loan is assumable, so why would you want to push a string uphill? Just for giggles why not call up a few lenders on houses you are looking at to test your theory? Trust me, you will get weary after a call or two. But back to your original question… How are you going to get a better deal by assuming the loan?
Posted by Brian-MA on February 03, 2004 at 14:23:16:
I get your point that it might not work with the lender - although logically it should. BUT, this is not speculating. It’s is assuming a loan that is 20% less that MV. The only reason I want to structure it this way is because more sellers would be amenable to the idea. The larger your market is, the better the deals you can get…