Subject 2 mortgaging

[Ahmad Moore]

With regards to Subject 2 in Alabama, my plans are to immediately get from under the previous owner’s mortgage as I could get better rates and terms.

Subject twoing the property was the best option as owner didn’t want to wait on me to obtain traditional mortgage.

So, the question is since I’m acquiring the deed, I can immediately, within 30 days to get a mortgage on this property in my name? Anything I should be worried about along the way? 

Thanks

[Denise Evans]

@Ahmad Moore, a limited power of attorney lets you do certain things for the person who signed the POA. So, if the POA said so, you could sign a deed. But, you already have a deed, or will have a deed shortly, right?

The "seasoning" issue has to do with FHA insured mortgages on property that has changed hands again within 90 days. There is always a suspicion of flipping in that case. But, again, you will already have the deed, so I don't understand the real estate agent's concern.

"Who gets what" depends on the contract you sign with the owner.  If nothing was said about the matter, and you did not get your own financing until 4 months later (as an example) then your payments will have included tax and insurance escrows.  When the mortgage is paid off, the remaining balance in escrow accounts will be paid by the mortgage company to the original owner, not to you.

Insurance is also an issue, because if the "subject to" mortgage payments you make each month include an escrow for insurance, that insurance protects the former owner, not you. But, he doesn't even have an insurable interest any longer.  He can point that out to the insurance when you close on your new mortgage and he can get a refund. Part of that will be money YOU paid into the escrow accounts. 

Remember, the insurance paid by the mortgage company protects lender and former owner. You will need to get your own casualty insurance.

You cannot make decisions based on an assumption you will close in 30 days on a new loan. Prudent business people always assume the worst, and make provisions for that in their agreements, just in case.