buying home "subject to"

[tradinglife]

I was telling a client of mine about not being able to buy a home because of my BK, he said I should look for foreclosures and take over the payments (buying them subject to existing loan). He says in today's market few lenders would call the note as long as you make the payment, and the seller gets out from under the mortgage. He said you could actually get your name on the deed and get tax credit and insurance on property. He is a pretty smart guy, been flipping real estate for a while. However what he says sounds too easy, wonder what the catch is? Anyone had any experience with this type of transaction?

[mlsj2009]

Sorry, but it sounds to me like this "pretty smart guy" has pulled the wool over your eyes. No bank is going to allow anyone on a deed without going through the closing process. If it sounds too good to be true, it is probably not true. Buying foreclosed property either requires a good deal of cash, good credit, or a good government backed program to support the process. I would hesitate paying someone's mortgage payment without the legal documents to entitle me to deed. Something just shady about that kind of deal, and I doubt the banks or government would get involved without the proper paper work, which of course, will require credit checks.
Too, the friend is also wrong about banks not foreclosing as long as a payment is being made. It all depends on the circumstances of the property, and some of the banks will foreclose anyway regardless of payments if there has been a default.

I was telling a client of mine about not being able to buy a home because of my BK, he said I should look for foreclosures and take over the payments (buying them subject to existing loan). He says in today's market few lenders would call the note as long as you make the payment, and the seller gets out from under the mortgage. He said you could actually get your name on the deed and get tax credit and insurance on property. He is a pretty smart guy, been flipping real estate for a while. However what he says sounds too easy, wonder what the catch is? Anyone had any experience with this type of transaction?

[tobee43]

yes, they are doing that in some states, and some more than others. what it's called; is a varied "land contract"

usually a broker with work with the the parties involved and try to help the person to "assume" the existing mortgage by helping them or guiding them into upping their credit scores. i know a few people using this sort of land contract as i type. do they work???? sometimes and sometimes not. as the bank will still have the option at to allow on to assume the existing mortgage. or the people get into the house and their financial situation changes and so on and so forth. however, for the moment it relieves the "old" owner from paying the mortgage and it allows the "new" owner to have a home which they may not have been able to buy any other way.

in an ideal land contract, the bank allows the one party to assume the payments after being cleared credit wise. that can take a few years. in some cases the deed is already drawn up and ready to tranfer at a moment's notice.

[tradinglife]

Hmm, may have to look in to this, sounds like it could be a loophole to get into a home. We are actually negotiating a lease to own option right now with a realtor on a home that has been on the market for a year. The owners have been hot and cold on doing the deal, supposed to meeet with them this week to finalize the deal one way or another. Have still been looking and researching in case this deal does not work out, actually have 2 sellers considering doing contract sales with us, both on actual "nice " homes, but it's taken a lot of work to uncover them. Hopefully by the end of thsi week, we may have a new home!

[tobee43]

Hmm, may have to look in to this, sounds like it could be a loophole to get into a home. We are actually negotiating a lease to own option right now with a realtor on a home that has been on the market for a year. The owners have been hot and cold on doing the deal, supposed to meeet with them this week to finalize the deal one way or another. Have still been looking and researching in case this deal does not work out, actually have 2 sellers considering doing contract sales with us, both on actual "nice " homes, but it's taken a lot of work to uncover them. Hopefully by the end of thsi week, we may have a new home!

we did a lease option to buy. the owner lived out the country and really wanted out of the property. we were also fortunate, as he did not have or owe a mortgage on the place. so what we did was we exercised the option early, added a good sum to his asking price. offered a substantial down payment and asked him to hold the mortgage at 5%. he accepted. now of course this is not a 400k home. it's one we can afford and the price was still low enough where we will be paid off with 36 months since we are putting almost every dime other than some savings into paying off the mortgage. we purchased this house last feb and how are owning about 1/2 of the entire mortgage.

the great thing about it, was NO banks involved, i did also all the paperwork and dealt directly with the owners atty. these houses are NOT a dime a dozen and we looked for quite a long time before we did this. is it the house of our dreams NO...but it is one we will always be able to afford and not have to worry. so it can be done!


we did a lease option to buy. the owner lived out of the country and really wanted to sell. i exercised the option early and added a ton of mom

[HHM]

I wouldn't count on it.

Tobee, that the person is suggesting is a bit different than a land contract.

A land contract is essentially a deal between the current owner and the buyer. If the current owner is already in default, it can be very difficult to get the land contract done. The current owner needs to get the mortgage out of default.

What this person is suggesting is a mortgage assumption. Mortgage assumptions are really no different than getting a mortgage. You still need to qualify under regular guidelines.

[tobee43]

I wouldn't count on it.

Tobee, that the person is suggesting is a bit different than a land contract.

A land contract is essentially a deal between the current owner and the buyer. If the current owner is already in default, it can be very difficult to get the land contract done. The current owner needs to get the mortgage out of default.

What this person is suggesting is a mortgage assumption. Mortgage assumptions are really no different than getting a mortgage. You still need to qualify under regular guidelines.

true hhm. however, recently, i have seen brokers draw up what i can refer to as facsimiles of basic land contract to fit the need or the criteria of the situation. it's not just the "basic" exact definition of what we most likely know as an actual land contract. also part of the contract of the good faith "down payment" for such a contract can cover the arrears of the previous owner bringing the property back into good standing. agreed the mortgage must be in good standing.

in one of the land contracts recently reviewed it was clear it was a land contract with a the goal of the assumption of the mortgage. this broker is working directly with GMAC to have the "new" potential owners assume that mortgage, however, the contract was made to fit or was made up as a variation of what one would refer to as land contract. it's legal in that state. although, that particular one is not working out as the potential buyers have not been paying, now the recourse is an eviction much like a rental would work. potential problems like that can happen with these situations and one should only proceed with extreme caution and with their eyes wide open.