"Subject to" Name still on mortgage. - Posted by Dave

Posted by Dave on February 18, 2002 at 10:54:05:

Thanks for the replies-

If asked this question from a seller, i would be able to let them know depending on the loan type that they would be able to treat the property as an investment and would help their credit scores as long as the buyer does not default? They could claim up to 75% of the payment as income?

Thanks again for a response!


“Subject to” Name still on mortgage. - Posted by Dave

Posted by Dave on February 17, 2002 at 21:43:18:

Hi- Thank you for all the great posts on this sight!

Question: If i buy a house “subject to” and the seller is motivated and i proceed to do a lease option with a new buyer, Will the motivated seller be able to buy another home or get credit for auto etc. with their name still on the mortgage?

I need a good lesson here on this subject. Wouldnt the seller be at risk for years possibly?


Re: “Subject to” Name still on mortgage. - Posted by Bud Branstetter

Posted by Bud Branstetter on February 18, 2002 at 09:28:45:

Cars and consumer credit will depend on their scores. They adjust the interest rate to make their money. Ratios matter very little.

If the motivated seller goes to a new lender it all depends on that lender. While there would be a problem with a a second FHA loan there is much less restriction on a conventional. VA loans revolve around their eligibility for guarantee of a certain amount. If you direct them to your mortgage broker the ratios will not be affected. He is more likely to treat it as a CFD situation in which the 75% credit of rents is not used. There are approaches such as Gatten’s EHT that there is an almost 100% record of the seller not having the old property taken into account when figuring ratios.

The seller will be at risk from inexperienced and lowlife investors that let the loan go into default. Third party collection, third party trustee and provisions to regain the property if they have to lowers or eliminates the risks to the seller.

Re: “Subject to” Name still on mortgage. - Posted by Jonathan(WA)

Posted by Jonathan(WA) on February 18, 2002 at 04:03:39:

When it’s an investment property lenders will generally allow you to use 75% of the income from the property lease, so it shouldn’t really be a risk to the seller unless your getting into a higher mortgage range.

Re: “Subject to” Name still on mortgage. - Posted by texasrealtor

Posted by texasrealtor on February 18, 2002 at 07:27:16:

That is correct. However, from my personal experience this is not the case if it’s a VA loan. VA requires that one property loan must be paid off (or in the process of being approved for assumption) before they’ll entertain approval for another. There are various rules that also apply if the seller has two VA related loans (i.e. raw land and residential housing). Hope this helps…happy investing!