Hi, I am learing about the sub2 mortgage approach and I was wondering about using it to purchase the house I am renting becasue I want to keep the house for myself without reselling it. I have a situation that I think using a sub2 would work great for because I dont have the money for downpayment and my credit score is a little lower than what i would need for a regular loan. My current landlord built a new house a few years ago just before the economy declined and he already owned the house i live in now but couldnt sell it at the time so he rented it to us. That was about 2 years ago and I know he badly wants get out from under our home. Recently he lost is job and now has to carry his mortgage on his new home (about a $500,000 dollar home) and the mortgage on the home that I am living in. If I could get him to agree to a sub2 deal and the deed was put in my name, would it make it easier for me to get a home loan so I can pay his loan off because i technically own the house and also who would be responsible for repairs and taxes and insurance at that point? Also how many years should a sub2 be carried out before the original owners loan is paid off in full. I ask this question because I think the house is going to need some plumbing work and I want to cover my bases before making an offer. He was asking $299,000 2 years ago just as the economy was heading downward and couldnt get it, so I’m not sure what it would be worth now and what he owes on his loan. I have seen 5 homes recently on the same street he lives on that are for sale, the homes are only a few years old.
Who’s ever name is on the deed is the owner of the home.
You are talking about to different things here.
- With a “subject too” purchase, you purchase the home outright. the owner signs over the deed to you and you agree to make the payments to the lender, paying off the balance of the loan. When you buy the property this way the lender still has a 1st lein on the property. The lein follows the property, not the deed holder. You may also give the owner some money if he wants cash for the equity he has. The owner does not doing any financing in a subject too purchase. I’t very important that you know if there are other leins on the home before you make an offer. The title abstract Schedule C will reveal if there are additional liens on the property.
- land contract purchase is when the owner owns the home free and clear and he then can act as the bank and be the lender. You make payments to the owner and the deed/title remains under the name of the owner untill it is paid in full, then it transferes to you. you have only “equitable title” to the peoperty.
Thank you for the reply. If I understand you correctly, a Lease to own deal cant be done unless the owner has no leins on the home, but in the case of a sub2 deal in which i get the deed signed over to me and the owner has a lien still owed on the house I just make the payments to his mortgage company. If so, that means that if I do a sub2 and I want to eliminate the original owner from the equation i would have to take out an initial mortgage in my name and pay his existing mortgage off or is it possible that because the deed would be in my name I could refinance what he owes in my name in order to pay his loan? Also you mentioned the lein follows the home not the deed holder, meaning if the property gets forclosed on, the original owner that has the lein in their name would be responsible not the deed holder. I really think because of the situation he is in he would agree to sign it over to me for what he owes just to get out of it, that way when it comes time for me to get a loan for the purchase price it would be only for what he owes on it which I am pretty sure is less that market value.
You can do a lease-option with liens on the property. The two aren’t really related.
If I could get him to agree to a sub2 deal and the deed was put in my name, would it make it easier for me to get a home loan so I can pay his loan off because i technically own the house
Yes it would be easier for you! With the sub-2 approach you can refinance, instead of “purchase” the home. Even if the deed is in your name for a short time. Loan packages vary between purhcases and refi’s and you will likely have an easier time refinancing - not to mention you won’t need a down payment (assuming there’s enough equity in the home)
and also who would be responsible for repairs and taxes and insurance at that point?
The owner! And that is you.
Also how many years should a sub2 be carried out before the original owners loan is paid off in full./i]
It depends on the loan - you’ll need to see the original mortgage documentation to know for sure or contact the lender.