Why Can’t you Seller Finance FHA Loans?

[Sardar Mustafa Khan]

Looking to do my first Down Payment arbitrage deal, but once setting up paperwork I noticed an FHA case number on the sellers loan documents.

Does this prove that the seller has an FHA loan on the property?

I always heard Tom Ferry say you can't seller finance an FHA loan, why exactly is that?

[Barry Pekin]

@Sardar Mustafa Khan,

You might want to look into Subject To.  This is where you take over paying the mortgage from the current owner.  Technically, a mortgage has a due-on-sale clause, which means that when the property is sold, the mortgage is due in full.  However, from what I have heard (a lot), the bank virtually never does that.  They're happy the mortgage is being paid and almost certainly don't even know about the sale - or care.  The reasons a seller would do seller financing vs. Subject To are rather different.  If nothing else, it's worth learning this strategy.