Trying to take over my friends mortgage

[James Myers]

How can I take over my friends mortgage without going through the purchasing process and being required to have a down payment. I've heard he could quitclaim it which would put my name on the deed but he would still be liable for the mortgage which I would agree to pay. Is this the gist or is there more detail I am missing? My current thought is what about insurance coverage since he would be paying it through his escrow?

[Chris Mason]

Fannie Mae removed the "continuity of obligation" requirements for rate and term refinances about a year ago.

What that means is that, if there is equity in the deal, and no one is looking to net any profit, you can rate and term refinance his mortgage into your name without any 6 or 12 month title seasoning (what we used to have to do) clouding things up.

I can count on one hand the number of times I have done this, and California laws may differ from Tennessee laws. When I've done it, I've politely insisted that the borrower hire a real estate lawyer to confirm that it's on the up-and-up & tell them about tax implications for both parties.

Cost of a real estate lawyer plus refinance closing costs will (should?) be way less than costs associated with a home purchase. You will (should) still get owner's title insurance, and the lender will still need lender's title insurance. Total closing costs will be much less than a purchase, but still a tad more than a vanilla refinance (f. ex. there may be transfer taxes in addition to the owner's title insurance, both costs that generally do not exist on a vanilla refinance, on top of the lawyer I'm suggeting you hire).

Find a lender licensed in your state that can spell the word "c o n t i n u i t y" without google (& post back with how many you have to call before someone passes your simple spelling test!), and a local real estate lawyer. While you're at it, you may as well take some of the savings you are getting by not doing this as a purchase, and buy the interest rate down to something stupid low so you can brag about it to your friends at cocktail parties and/or on BP. :P