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©
2002 Ruth E. Campbell. |
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Frequently Asked Questions Mortgages
- Q & A
A: "This method of seller financing is risky if the
underlying first loan has a "due on sale" clause because
the loan might be called due when the first lender becomes aware
that the property has transferred title," says Dian Hymer,
author of "Buying and Selling a Home, A Complete Guide,"
Chronicle Books, 1994. A seller usually will want to incorporate a late charge to encourage
the buyer to make monthly loan payments on time. "A buyer
will probably want to stipulate that prepayment of the loan be
without penalty. This should not cause a problem unless the loan
payments are a source of retirement income, in which case early
prepayment could have negative financial repercussions for the
seller... "Most sellers prefer to have a due-on-sale provision included
in the note, but this can be a negotiable item. Buyers who are
concerned that they might be forced to sell during a period of
high interest rates can request that the note be assumable by
a future buyer, and sellers might find this provision agreeable
as long as they have the right to approve the future buyer's credit
report and financial statement," Hymer writes. Q: Are FHA loans assumable?
Q: How do you find out if a loan is assumable?
A: Look to the loan agreement to determine if it is assumable
by someone else. Then talk to the lender about specific requirements
based on the value of the home. Assumable loans permit one borrower to take over a loan from
another borrower without any change in the loan terms. Such loans
still exist but they aren't very common or popular (for buyers)
in a low-interest-rate environment. Plus, today new assumable
loans are almost always adjustable rate mortgages.
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