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ruskitd

Owner financing...what do I need to know...?

RuskitD
10 years ago

Hi! Really hoping for help/ideas. I am buying a home in Missouri, that the owner is financing. The papers are being drawn up now.

I intend to have an attorney look them over, of course. But in the meantime, I have a bunch of questions.

First, they owe on this house. Is there a way I can demand to insure they continue to make the payments, while I am making payments to them? I have heard horror stories of people losing their homes because former owner/lein holder defaulted on their loan.
Or is there insurance I can buy?

What else should I ask? What do I look for? I am hoping the papers will be 'right' before taking to the attorney. I don't want to have to banter back and forth too long, or rack up a huge bill with the attorney.

Any assistance is greatly appreciated!

Comments (7)

  • Linda
    10 years ago

    As far as I know, the owner can't hold a mortgage on a house they don't own. Title can't pass because the original loan is not satisfied. As far as racking up arty fees, typically attorneys don't charge by the hour for a real estate transaction. In my area, its under $1000.

  • C Marlin
    10 years ago

    Are you buying the house on a contract from the sellers, you won't actually take title as they will still make their current mortgage payment and retain title? Do you plan to pay a second mortgage to them?

    If this is what you are describing, I wouldn't do it. Talk to your attorney if you have a reason why you want to risk this.

  • kirkhall
    10 years ago

    I'd only possibly do that if part of my "payment" to them was directly to their lender and the rest to them (in other words, I'd be paying off their loan for them).

    This does not sound like a good situation, at. all.

    You will be the second (or third or fourth...) lein holder on the house and should it default and go to auction, you could see absolutely none of your money back.

  • liriodendron
    10 years ago

    Risky business, all around.

    Unless they pay off their mortgage at closing, transfer title to you and then are just the lenders (you owe them them money but otherwise have clear title).

    Otherwise, you could wind up putting a lot of money into this and lose it.

    Perhaps we don't understand what you're intending?

    L.

  • rrah
    10 years ago

    I would be very, very cautious here. There is no insurance available to my knowledge.

    How old is the seller's mortgage on the house? It's very rare for a mortgage to permit the owner to sell the house without the mortgage being due immediately. The vast majority of mortgages have a "due on sale" clause. This means that the owner's mortgage is due if/when they sell the house. The lender can demand full payment if the house is sold to you.

    Most real estate sold with owner financing has no mortgage on the property.

    Sorry, I suggest you walk away from this situation.

  • rafor
    10 years ago

    Don't think that's doable. Their lender wouldn't approve that. I'm currently financing my house that I sold 2 months ago. It sold in 24 hours! I owned it outright and the buyers had a house to sell. Rather than do a contingent sale, my realtor ( who I had used when I bought the house 3 years ago) knew I owned it outright and asked if I would finance it so they wouldn't have to do 2 closings. I said I would, but only for a year. So they gave me a big down payment and send me monthly checks. All the paperwork was done by a title company and all went smoothly. I get a good interest rate, much better than any bank pays and they got to move in immediately. It's all working so far.

    Your situation sounds sketchy.

  • lazy_gardens
    10 years ago

    It's called a "wrap-around mortgage" and it's risky because if they stop paying, YOU lose the house, the down payment and the equity unless you can do some fast refinancing.

    And, it may trigger the "due on sale" clause of the seller's mortgage ... if there is one.

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