Desoto County Mississippi Real Estate
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Desoto County Mississippi Real Estate
Hernando, Olive Branch, Southaven, Nesbit & Walls in Desoto County
Mississippi
| Q: | What is a wrap-around loan? |
| A: |
"This method
of seller financing is risky if the underlying first
loan has a "due on sale" clause because the loan might
be called due when the first lender becomes aware that
the property has transferred title," says Dian Hymer,
author of "Buying and Selling a Home, A Complete Guide,"
Chronicle Books, 1994.
A seller usually will want to incorporate a late charge to encourage the buyer to make monthly loan payments on time. "A buyer will probably want to stipulate that prepayment of the loan be without penalty. This should not cause a problem unless the loan payments are a source of retirement income, in which case early prepayment could have negative financial repercussions for the seller... "Most sellers prefer to have a due-on-sale provision included in the note, but this can be a negotiable item. Buyers who are concerned that they might be forced to sell during a period of high interest rates can request that the note be assumable by a future buyer, and sellers might find this provision agreeable as long as they have the right to approve the future buyer's credit report and financial statement," Hymer writes. |
| Q: | Are FHA loans assumable? |
| A: | Lenders will only permit those loans that have a "subject to transfer" clause to be taken over through a formal assumption process. Look to your loan agreement for specific terms. In addition, you should candidly discuss any risks with your lender, and possibly consult an attorney before signing the final agreement. |
| Q: | How do you find out if a loan is assumable? |
| A: |
Look to the
loan agreement to determine if it is assumable by
someone else. Then talk to the lender about specific
requirements based on the value of the home.
Assumable loans permit one borrower to take over a loan from another borrower without any change in the loan terms. Such loans still exist but they aren't very common or popular (for buyers) in a low-interest-rate environment. Plus, today new assumable loans are almost always adjustable rate mortgages. |
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Cara O'Bryant Realtor Associate Licensed in Mississippi & Tennessee 901-212-0047
Bob Leigh & Associates Realtors,
LLC |
