Possible to partner with homeowner on current mortgage?

[Rance Gregg]

New investor looking to jump in. A friend is selling his house after 4 yrs and needs the cash equity for buying new house. (Maybe $30K) Can we partner on house, pay him what equity he has in house, keep the current loan p/i and term the same, but add me to the deed? He stays there for another 4 months and then we rent it out?

He gets cash he needs and I get to take advantage of interest rates FHA home owner loan. That make sense?

[Farrukh Amini]

Yes, that's called buying subject to the underlying loan. Just make sure you get your paperwork and clauses drawn up by an attorney who's familiar with these deal structures so you and the seller are both protected. The seller needs to know and acknowledge the due-on-sale risk and a few other important things, like the fact that this mortgage will still be counted towards his DTI when he gets a new loan. Even if you provide documentation that the seller is no longer responsible for payments, most lenders require 6-12 months seasoning before they can remove it from the seller's DTI. But this is relatively easy. Good luck

[Rance Gregg]

@Farrukh Amini thank you! Very helpful.

[Tom S.]

@Rance Gregg I'm not in total agreement with the above post. The seller will have that mortgage attached to his name until it's paid off, so I don't believe it would be removed from his DTI after 6-12 months. So he would have to be able to qualify for 2 mortgages, the new one and be able to keep the existing one. Only if you refi and pay him off would that mortgage be released. But your refi may or may not give you the great FHA rates you mentioned.

To me, I see these deals as pretty complicated and tend to shy away from them.  But that's me.

Good luck!