Short Sales, Foreclosures, and Assumable Loans: Client asks: "Why can't I just take over the payments on a distressed property?"

Real Estate Agent with Maui Life Homes / Metro Life Homes RS-78439 / BRE #01708344

Short Sales, Foreclosures, and Assumable Loans: Client asks: "Why can't I just take over the payments on a distressed property?"

I had a client with a recent bankruptcy filing ask me about buying a home where they can "just take over the payments" on a property.

So this brings up the subject of Assumable Loans and Predatory Buying.

First of all, currently there are not alot of assumable loans out there with the exception of some FHA loans and VA loans.

Most assumable loans that are existing on properties right now are the "qualifying" type, which means you must quallify and go through a normal loan appllication process with the bank, or holder of the note, in order to assume the loan.

It used to be the case where years ago some of these FHA loans and VA loans were "non-qualifying", which meant the new buyer or assumer of the loan did not have to qualify financially with FHA or VA.

But FHA and VA stopped writing non-qualifying assumable loans years ago.

Secondly, whatever non-qualifying assumable mortgages are still out there are at least 8-10 years old, which means the current owner has probably built up a good amount of equity in the house (unless they've pulled it out), which means you're going to need a good sized down payment to assume the loan.

So is it impossible right now to find these types of non-qualifying assumable loans?  No.  But the percentages are very low in which you will find one where the "magic" that you're thinking about will happen.

Another thing for agents and their buyers who are considering distressed properties is that when a Notice of Default is issued on a property, legally you cannot represent the buyer.  Not in the normal fashion, anyway. 

For more information on when/why/how to use the Notice of Default Purchase Agreement, click here to read my blog about that:


Re-Blogged 2 times:

Re-Blogged By Re-Blogged At
  1. Richard Ruggaber 05/19/2010 03:49 AM
  2. Rose Osman 07/21/2010 06:00 AM
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Glenn Roberts
Retired - Seattle, WA

Those non-qualifying FHA assumptions were quite the deal in the late 80's and early 90's. A pretty good way to get a couple of properties into an investor's portfolio. But all of that has changed now. I thought the Notice of Default-Can't represent the buyer was just a Washigton law. You have it too? I look forward to your post on it.

May 19, 2010 03:43 AM #1
Rita Fong
RE/MAX REAL ESTATE TODAY, Executive Broker 901-488-9590 - Marion, AR
Realtor - Marion Arkansas Homes for Sale

Ralph, I would like to know more about the Notice of Default, I am not familiar with it at all.  Thanks ahead for sharing with us.

May 19, 2010 04:45 AM #2
Melissa Zavala
Broadpoint Properties - Escondido, CA
Broker, Escondido Real Estate, San Diego County

I just ran into a client who wanted his cousin to assume his loan and the borrower is totally upside down. Ugh!

May 19, 2010 05:45 AM #3
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Ralph Gorgoglione

Hawaii and California Real Estate (800) 591-6121
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