Can you assume a loan in conjunction with seller financing?

Question

Here is the scenario the owner wants 200k for a home. You cant use a 200k conventional loan. He owes 100k on the property......

Can you assume his 100k loan and then also do a seller finance for the other 100k?

If so would it be any different than doing both of these things separately? Would you have to let the bank know you are doing a seller finance on half of the deal? Or do you not have to disclose this information? Thank you!

Casey Ferry · Answer

I sent you a message sir

Chris Evans · Answer

When you say you can't use a 200k CONV loan, is that due to eligibility issues?If the seller has a gov. backed loan (FHA, VA) then the loan may be assumable. In the event that it is, you would still have to qualify for the loan by going through underwriting. The remaining payment can be set up as owner financing, cash, or second mortgage, but may be subject to the loan standards as equity requirements for the assumption. For example, an FHA loan may not accept the assignment if you're 0% equity in the deal and the FHA MIP is no longer on the note. In that scenario, they may require at least a 20% cash contribution from you to reduce the default risks.

Beware of any "wrap-around" plays. There is no scenario in a wrap-around where the seller may keep debt on the property and you own the house with a clear and insurable title. You will always have a risk of default if the mortgage does not get paid. You also have the risk of liens being placed on the assets of the seller. A wrap-around would expose you to potentially catastrophic financial risk. Did this provide an answer to your question? If I'm misunderstanding your situation, please elaborate.

Casey Ferry · Answer

Would you mind explaining that more to me?

Eliott Elias · Answer

Why don't you wrap an owner finance loan around the existing debt?