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: