To assume or not to assume... - Posted by Maria

Posted by Matt B on March 26, 2001 at 06:56:48:

This doesn’t look like much of a deal to simply assume the loan. Obviously, since the owner bought it in November, the mortgage is assumable with qualifying. What makes that so great? You still have to go through qualifying for the loan. There may be something I’m not seeing here or you’re not posting, but why does this look like a good deal to you? Is it that you can get the place with no money down? What is your exit plan? Are you going to rent the place out? With those numbers and area rents, that doesn’t even seem like that great a deal.

To assume or not to assume… - Posted by Maria

Posted by Maria on March 25, 2001 at 22:17:05:

This is the first time I have come accross an assumable mortgage. I would appreciate any input.

Information on the property:
3 Br/1 Ba (1925) with covered porch and deck and a detached garage. Fully assumable FHA mortgage for $66,000 at 8.375%. Owner selling for payoff, no money down needed. Monthly payments including PITI $639.Owner only bought the property last November, so not much equity yet. Going rents in the area $650-$700.

House is in a good shape, just needs some minor costmetics/painting. Seller is willing to do the painting if supplies are provided, or will pay an extra month’s mortgage.

Should I assume or not? I believe that the cashflow may not be enough. Any creative ideas???

Thank You.


No way, No how - Posted by Bud Branstetter

Posted by Bud Branstetter on March 26, 2001 at 09:35:56:


The others have said it. But I can tell you how I would make money since the owner evidently wants the debt relief and to go do something else. I would buy nothing down subject to the existing mortgage. If I felt sure that I could find a buyer quickly by offering owner financing I would commit to making the payment May 1. If I wasn’t sure I would option it or have the contract specify that they would make payment until I got an occupant. I would sell for 75K at 750/mo with 3k+ down. I would use the Pactrust to facilitate this. It could be done conventionally using a land trust if you know how to arrange that. By using the Pactrust the trustee could write a letter specifying that, in effect, the property was sold. This would allow the seller to get a loan on a new property without having to have the old loan figured in.

Re: To assume or not to assume… - Posted by B.L.Renfrow

Posted by B.L.Renfrow on March 26, 2001 at 08:20:23:

If you are simply looking for a place to live, and are willing to pay FMV, sure, you can assume the loan, if you qualify.

But this is no investment, let alone anything “creative”. Assumable, in this situation, really is no different from simply going to the bank and getting a loan and buying at market value.

If you want to do something creative, why not try lease-optioning the property, or buying subject-to the existing loan? By doing it this way, you control the property without assuming personal liability for the loan. You can then lease-option it to a tenant-buyer, or sell on a land contract, and in doing so, because you’re offering terms, you can sell above market value and/or command premium rent.

Brian (NY)

Re: To assume or not to assume… - Posted by TomC (MD)

Posted by TomC (MD) on March 26, 2001 at 07:32:22:

Hi Maria,

I was looking at a FHA assumption a few weeks ago, and I learned that only owner-occupants can assume loans originated after December 1989.

So if you want to assume, you will need to live in the unit.