Home Buying in San Clemente>Question Details

Richard, Other/Just Looking in 92672

By subject to I mean buying the property with the existing mortgage intact not subject to obtaining a mortgage

Asked by Richard, 92672 Fri Jul 13, 2007

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Buying a property "subject to" or a non-formal assumption of the loan is possible, though typically not allowable by the lender. Most loan documents have an acceleration clause in them, that makes the loan payable in full at the time a property sells. A slight variation on this is the "wrap" financing. This is done by the seller offering financing on the property via a deed of trust which "wraps" the existing mortgage. The buyer pays a mortgage payment to the seller (previous owner) and the seller makes his payment on the orignal note (which stays on the property). Again, this is almost always not allowed by the way the loan note is written. Is it done, yes. Especially in turburlant real estate times that many communities are experiencing recently. There are many strategies to do this in the most effective way possible and to avoid the pitfalls of a lender accelerating the loan. This is a tricky playing field and should not be navigated without good guidance. Best of luck.
3 votes Thank Flag Link Fri Jul 13, 2007
Mario Pinedo,…, Real Estate Pro in Cupertino, CA
I will provide a short answer to your question
It is very unlikely that you could find a mortgage today that doesn't have a "due on sale" or "acceleration clause". Therefore any "wrap" or other scheme is a breach of contract with the lender. In todays world of mortgage fraud, and all the audits going on, I doubt that you want to become involved in this. Best of luck.
Web Reference: http://www.tucsonnw.com
0 votes Thank Flag Link Thu Apr 17, 2008
If the loan is assumable and you qualify, yes.
Web Reference: http://www.OCBeachBlog.com
0 votes Thank Flag Link Tue Feb 12, 2008
Probably, but how big of a risk taker are you? Lots of the late night real estate gurus teach this and it has probably been done successfully in the past. However you always risk the due on sale clause. Some people tell you this is never invoked, but who is to say it won't be in 5years-10years-20years. I sure would hate to put my money at risk. Lenders do check periodically to see who is in the property and where the owner is. You certainly don't want to get caught up in any loan fraud issues. People have gone to jail for that recently. Even if it is not you, do you have time to go to court for a week or two as a witness? Do you wan the FBI knocking on your door or that of your tenants?
Web Reference: http://www.teamlynn.com
0 votes Thank Flag Link Mon Jul 16, 2007
Bruce Lynn, Real Estate Pro in Coppell, TX
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