Taking over payments

Hey all I am a newbie at investing in realestate I have read quite a few books on it like Rich Dads series Robert Allens nothing down and multiple streams of income. I have come across a dont wanter and he said I could take over payments on the loan, but I do not know if I need to get qualified by his bank or lender to take over or who i can go to to have a contract written up any help would be greatly appreciated

What will you do with the property if you agree to take over the payments?

Depending upon what you plan to do with the property, you could

Put the property under contract to purchase subject to the existing financing and then assign the contract to another investor for an assignment fee. Or, you could take title in your name and either resell for a profit or hold for rental income.

Your next step should probably be a visit to your attorney to have contracts drawn up.

I’d question the motives behind ‘wanting out’ as discreetly as you could. Ask questions, ask questions, ask questions. The last thing you want to do as a rookie is inherit someone else’s mistake. Who knows, maybe the guy just wants out; or maybe there are some key things you could improve to maximize cash flow. Either way, be scrupulous and good luck!

I was thinking of living in the house for a year to do some fix up, from sales around the area I think the value of the house is around 155,000. I would be taking over payments for around 108,000. It is not a problem house the couple are in a seperation were one moved out of state the other wants to follow so wants out of the house. Thanx for the info, But do I have to qualify to take over or can I just assume

You have to qualify to assume. If you have good credit and the terms of the seller’s mortgage loan are favorable, don’t hesitate to assume. Have the seller contact his lender and ask for an assumption package. You can often get the seller’s escrows assigned to you as part of the assumption. Have your attorney make this a provision of your purchase agreement.

There is no qualification if you just take over the payments. If at some point, you need to get the seller’s name off the mortgage, you will need at least six months on the deed before you will be able to refinance in your own name.

So you are saying I cannot get the seller off the mortgage until I make payments for at least 6 months. That would make it easier for the bank to accept anyway right? During that six months my name is on the mortgage also or do I have to go through the bank to get my name on the mortgage? Like i say I am a newbie at this just read a few books and they just tell you what you can do they do not tell yo how

Your name is not put on the loan unless you formally assume the loan. You can assume the loan when you purchase the property from the seller and get the deed in your name.

If you just take over the payments, the loan stays in the seller’s name. Your name is not on the loan. For most lenders, you have to be on title at least six months before you can refinance the property and get a loan in your own name which will payoff the old loan in the seller’s name.

Dave - now I am confused… why can’t he refinance immediately when he buys the property. Actually if his name is not in the mortgage, why are you calling it refinancing? It seems that we are making this more difficult than it should be. Here is my thinking:

Option 1 - the seller’s current terms are great - in this case you would probably try to assume the loan (if allowed) and then there is no refinancing - you want to keep the existing good terms…

Option 2 - the seller’s current terms are not great and you can get better terms elsewhere - in this case you can get your own financing (new financing) and pay-off the seller’s financing. And again, no refinancing…

So why are you talking about refinancing and seasoning?

Am I missing something here?

Have a nice evening!

The difference is in who’s name will be on the title. If Doogsters gets a mortgage immediately to pay off the seller’s loan, that is simply purchasing the property and placing the title in Doogsters name. Dave was saying that if Doogsters didn’t qualify to get a mortgage himself, but could make the payments on the existing loan then Doogsters could simply make those payments to keep the loan current. The title would still be in the other guy’s name though. If Doogsters later needed to get the other guy off the title, Doogsters would need to show he was on title as well and making payments for at least 6 months to do a re-fi in his own name.

Let’s set the stage. Doogsters has taken title to the property subject to the seller’s existing financing. The financing stays in the seller’s name and the seller stays liable for the loan even though Doogsters name is on the deed to the property.

If Doogsters wants to get a new mortgage to replace the existing loan the lender will see that there is an existing mortgage on the property. A new loan would be a second mortgage, unless Doogsters uses the new loan to “refinance” the first mortgage. Since Doogsters name is already on title to the property, the new loan is not to purchase the property but is instead to refinance the existing debt.

“Refinance” in the lender’s jargon has a specific connotation in the mortgage lending industry. It is not always intuitive. In a nutshell, there are two types of first position mortgage loans. If your name is not on title and you want to use financing to buy the property, the loan application will be for a purchase money loan. If your name is already on title and you want to replace an existing mortgage loan with a new mortgage loan, the loan applicaption will be for a refinance.

Even if you own the property free and clear and want to cash out some equity, your loan application will be to “refinance” your property. Under the lender’s guidelines, a refinance will require some period of time on title. The title seasoning requirement varies by lender, but six months fora refinance has been fairly common in my discussions with lenders.

Let’s reset the stage and say Doogsters wants to get his own mortage loan when he purchases the property. He understands that he can take over the existing financing either by formal assumption or by just making the seller’s mortgage payments (a Subject To deal). Doogster wants to use his own financing because his loan terms are much better than the seller’s loan terms.

In this situation, Doogsters will be able to immediately finance the purchase provided the seller satisfies the lender’s title seasoning requirement.

Justin/Dave - thank you for the explanation. It helps.

Have a good day!

I’m looking to do the same thing as Doogsters, but I would like to find a home to live in as opposed to flip for profit. Will banks share information on loans that are deliquent or going into preforeclosure? I live in Cook county which is currently leading the nation in foreclosures, I’ve been wondering if this will be a motivating factor for banks to respond more favorably to investors.

Dave-t thank you very much for the explanation that was exactly what I was looking for a simple explanation. I have to say thank you again