Posted by JPiper on December 14, 2000 at 15:46:07:
Originally you said you had a non-qualifying assumption. So that we’re on the same page, this means that in the case of FHA the loan was originated prior to 12/15/89, if memory serves. VA loans are prior to 03/01/88.
The buyer can either formally assume these loans OR do a simple assumption (non-qualifying). If the buyer formally assumes then you get a release of liability, if not, then you remain liable for 5 years.
Understand that sometimes the lender is not clear on these rules, and therefore the assumption department “assumes” that the loan MUST be formally assumed. For pre-1989 loans there are two different assumption packages.
You can sell with a simple assumption, but the ongoing liability is an issue (at least with me). To take care of this I will carry a second which gives me a way back into the property if the buyer defaults on the FHA loan.
I might consider a reduced buy-out on the second IF the buyer does the streamline process I mentioned in my earlier post, which will pay off the old loan thereby taking you off the hook in terms of liability.
Selling this way you can generally sell for a higher price…because the loan is non-qualifying and the streamline is non-qualifying as well.
Again though, if your loan is post 1989 then the rules of the simple assumption don’t apply. The loan must be formally assumed with the lender.