Assumed Mortgages

[Sunshine]

Our Ch. 7 was discharged in June 2007; we are giving up our home, which we were way behind on in payments; we got notice of the sheriff's sale in August and have not heard anything since; I checked online with our county register of deeds and there was a "Sheriff's deed" filed in early September; our attorney told us we had a 6-month redemption period, so I am thinking we have until the end of February to vacate the house.

We are looking for a house to rent and have thought that we should maybe rent with an option to buy, assuming in another year, we could get financing. In the process of looking, we came upon an investment company that has homes for rent with an option to buy, which, actually, they allow you to assume the mortgage in 3-5 years depending on your situation. The company had no homes in the area we were looking, so we asked if we could look at homes for sale and if we found something we like, would they work with us that way. They said yes, they might be able to purchase a home, as long as the seller is willing to work with them. We found a house we are interested in and are waiting for the investment company to get back to us about what happens next.

So, I am wondering, first, if anyone has any knowledge about assumed mortgages? Downsides to doing this? The investment company told me that they have everything reviewed by a legal department ( I work for a law firm and would have someone here take a look at everything). My concern is that we are dealing with people we don't know. Also, what if we can't get financing in a year or two? What questions should we be asking of the investment company?

Any insight would be greatly appreciated.

[Minnymouth]

I'm not familar with "assumed mortgages". Are they similar to a land contract???

Maybe some of the others are familar with this type of mortgage and will chime in with some help here...

[CindyLou]

One of the risks you run with a lease/purchase is that if the investment company defaults on the loan and the property is foreclosed on, then you are out of the house and out of your money, as they would include you on their BK.

There was a post just a few weeks ago from an investor who had accepted a $10,000 lease/purchase downpayment on two properties in which the tenant/buyers lived and he is now filing BK.

The "assumed mortgage" part comes into play only and only if you qualify to assume the mortgage.

Another thing to watch out for is to make sure that the lease/purchase agreement is not similar to a balloon loan. This is where you would put down money similar to a down payment upon moving in...then at the end of a fixed term...say 3 years or 5 years, you would agree to either purchase the home or walk away and forfiet your downpayment....much like you do when you lease a car.

The risk is that at the end of the term you are unable to obtain a loan or you choose not to purchase the house, you loose your downpayment. Similarly, if you have to move during the term of your lease, you need to find out about what happens to your downpayment.

This is risky. IMO you are better off renting for 2 years and then using an FHA loan to get back into a house, but there may be others that have more experience in this area or that have had a good experience with this. This information is from things I have read..not from first had experience.

Good luck and keep us posted.

cindy

[HHM]

Assumed mortgages are mostly scams.

Unless you re-finance the mortgage into your name, you will have no standing in the event of a default by the original debtor, or if the debtor decides to screw you over in some other way.

Assumed mortgages are essentially you paying someone else's mortgage...essentially renting.

[Minnymouth]

Wondered about assumed mortgages!!

At least with a "land contract" (if it's recorded at the courthouse), its as good as any mortgage thru a mortgage company. If the owner defaults, or claims bankruptcy, the holder of the land contract has 1st option to take over the original payments or original mortgage.... as long as the paperwork is written up with those terms...

Also the owner cannot resell the property (as long as the land contract holder has his "land contract" in good standing) and without permission from the land contract holder.

The key is having is having the land contract "recorded".........

Having it recorded protects the land contract buyer....

[HHM]

The key is to record whatever document memorializes the deal with the county recorder.

The other issue with any sort of "first option", is that it is that it only gives the tenant the right of first refusal. So if a 3rd party comes along and makes an offer for the house, all the owner needs to do is give you a fixed amount of time (usually 30 days) to match or beat that offer, if the tenant is unable to do so, then the 3rd party can buy the property and evict you.