FAQ
How do assumable mortgages work?
When a buyer assumes a mortgage, the current borrower signs the balance of their loan over to the buyer and the buyer becomes responsible for the remaining payments. That means the mortgage will have the same terms the previous homeowner had, including the remaining balance, interest rate, and monthly payments of the original term.
What is Subject-To?
A “subject-to” transaction refers to purchasing a property while keeping the underlying mortgage intact, essentially assuming responsibility for the existing mortgage. The term “subject-to” is on HUD-1 Settlement Statement lines 203 and 503, signifying that we are acquiring the property subject to the existing mortgage terms. Despite its long history, some seasoned investors, realtors, and brokers may not be familiar with the subject to strategy, and may raise concerns about its legality. However, the IRS recognizes and acknowledges the subject-to strategy. The IRS provides information on the subject in Publication 537, which can be found at this link: Buyer Assumes Mortgage
How is the seller protected?
The seller is also protected by a document called a Deed of Trust, and Promissory Note enforced by the closing Title Company. A Deed of Trust is a legal document that allows a borrower to transfer the ownership of their property back to the original owner to avoid lengthy foreclosure and lawyer fees. This document is completed at closing and drafted by the Title Company.
How are mortgage payments made?
We want this to be as painless as possible, we will pay a loan servicing company to service our agreement.
A loan servicing company is a third-party entity that manages loan-related tasks such as collecting payments, sending statements, and ensuring that the borrower stays up to date on their payments. This ensures the seller have peace of mind knowing that their investment is being professionally managed.
What happens if payments stop?
In the unlikely event that we are abducted by aliens and unable to make payments, the property would be transferred back to the seller through the Deed of Trust. This means the seller would keep all the funds paid so far, updates made, and regain possession of the house.
How do I get an offer?
To get a tailored offer, we will need some specific information about the situation. Don’t worry, while some of the questions might seem a bit personal, they’re essential in creating an offer that provides a solution to the ongoing situation. Here are the key pieces of information we need to be sent over:
*Phone number
*Full Address
*Loan Amount Remaining
*Interest rate
*Monthly Payment
* Major Repairs Needed
What happens next?
We’ll take a look at the information provided and may contact you to get additional details if necessary to move forward. Our goal is to provide a fair offer that’s a win-win-win for all parties involved. To be clear this is an OFFER, there’s no obligation to accept it. We’re putting options on the table to make an educated decision based on the information provided. Whether or not we work together toward a solution will always be your decision. If you do decide to work with us, we will get the resolution needed and will close on the date that fits your schedule!
What about my Debt-To-Income?
When a borrower is obligated on a mortgage debt – but is not the party who is repaying the debt – the lender may exclude the full monthly housing expense (PITIA) from the borrower’s recurring monthly obligations if the party making the payments is obligated on the mortgage debt, there are no delinquencies in the most recent 12 months, and the borrower is not using rental income from the applicable property to qualify.
In order to exclude non-mortgage or mortgage debts from the borrower’s DTI ratio, the lender must obtain the most recent 12 months’ cancelled checks (or bank statements) from the other party making the payments that document a 12-month payment history with no delinquent payments.
Review full mortgage DTI details here:
