Marilyn Ever…, Home Buyer in Port Saint Lucie, FL

How do I take over an existing mortgage?

Asked by Marilyn Everington, Port Saint Lucie, FL Thu Mar 11, 2010

We are currently renting a home, the owner is claiming bankruptcy next month. We would like to take over the mortgage vs loosing the home. Is that even possible and if it is how do I go about doing it?

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I would like to thank everyone for their advice. Let me specify, the home is appraised at 68k, 56k owed to bank, owner wants 80k. We are coming into a large settlement anyday now but owner can't wait. Our intention was to pay for home outright. This is becoming a major dilemma.
0 votes Thank Flag Link Thu Mar 11, 2010
Hi Marilyn
Only if it is an "assumable" loan. FHA mortgages are assumable, as are some conventional ARMS.

If this is not the type of loan the current owners have, then you have to treat it as a straight up purchase from the present homeowners. This can create a lot of difficulty depending on the value of the home and how much is owed. But the only way to really find that out is to speak with the lender who owns the loan currently.

I'd recommend you enlist the help of a local Realtor. best of luck!
0 votes Thank Flag Link Thu Mar 11, 2010
Hi Marilyn,

Your question was duplicated on our site. You can thus find some additional answers to your inquiry at the links below.

http://www.trulia.com/voices/Home_Buying/How_do_I_take_over_…

http://www.trulia.com/voices/Home_Buying/How_do_I_take_over_…

http://www.trulia.com/voices/Home_Buying/How_do_I_take_over_…

Please be sure to let us know if you experience any difficulties posting new questions on our site in the future.

Best Wishes,

Emily Gibson
Community Moderator
0 votes Thank Flag Link Thu Mar 11, 2010
Marilyn,

Is the home current on its payments? Is it going into foreclosure? I suggest that you contact your landlord and get this information. Find out if your landlord is willing to sell you the house, you then would have to qualify for your own mortgage.

Debbie Albert
Coldwell Banker Residential
0 votes Thank Flag Link Thu Mar 11, 2010
Marilyn,

You may be able to assume the mortgage depending on the type of mortgage the owner has. FHA loans are asssumable most Conventional loans are not. You will still have to qualify for the mortgage just like you would a purchase. The downside of assuming is he may have a higher interest rate than what is currently available and you may owe more thean the property is worth. The upside is you wouldn't have to have a down payment. It may be better to try to buy it from him if you can qualify for a loan. Depending on where the property is located you may be able to do a Rural Housing Loan which is still 100% financing and the seller can pay closing cost. If it is structured properly you can buy it for no or very little money out of your pocket.

If you would like to discuss your options feel free to give me a call.

Christopher Lyon
Fidelity LLC
941-412-1511
0 votes Thank Flag Link Thu Mar 11, 2010
Yes, it's possible.

You probably can't assume the loan. The loan probably is not assumable. However, there are half a dozen or so ways you can accomplish the same thing.

First, a disclaimer: I'm not a lawyer or an account. For professional advice in those areas, see a lawyer or an accountant.

Second: Recognize that the mortgage may be for more than the home is worth. So it might not be a good deal, financially, to take over the loan. Example: Owner bought the home 5 years ago for $500,000. He got a 100% loan, so he still owes close to $500,000. The home price has declined to $350,000. You'd be taking over a $500,000 debt on property worth only $350,000. There are times when that's the right decision, but more often it's not. So, be careful.

So, how do you do it? Lots of ways:

Subject To: You buy the home subject to the existing mortgage. The owner deeds the property to you. You promise the owner that you'll make the mortgage payments. That's it. Note: This technique violates the lender's due on sale clause, which says that the owner can't sell all or any part of the property without getting prior permission from the lender (unless the entire loan is repaid). Technically, if you violate the due on sale clause, the lender can foreclose. As a practical matter, that's unlikely. The lender would rather have someone--anyone--making full, regular payments on the existing mortgage than have to foreclose on the property.

Land Trust: The owner transfers the property into a land trust. He adds you as the resident beneficiary of the trust. So you own part of the trust, plus you're renting the property from the trust. You make your payments (often the amount of the mortgage--principle, interest, taxes, insurance) to a third-party trustee. The trustee, in turn, sends payment to the mortgage company. At some point in the future the property is brought out of the trust and you purchase it. A couple advantages to the land trust: If done properly, it doesn't violate the lender's due on sale clause. And as a beneficiary of the trust you can claim the tax deductions (interest, taxes) that a property owner could. For more information on those techniques, go to http://www.landtrust.net

In any case, make sure you have a good real estate lawyer assisting you. In the case of a land trust, make sure it's someone who really knows and understands land trusts; the folks at http://www.landtrust.net can point you in the right direction.

Hope that helps.
0 votes Thank Flag Link Thu Mar 11, 2010
Don Tepper, Real Estate Pro in Fairfax, VA
MVP'08
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