Assuming The Sellers Mortgage-Insight Plz
i dont necissarily understand what happens when a seller still has a loan to pay off on a house...
how the loan is assumed, pay for, by who...
i understand a bit but its cloudy water...
heres an example and the few questions id like to have answered...
example...what would if i wanted to buy a house worth $400,000
Seller has $50,000 in equity and still owes $350,000 on the loan/mortgage
if i wanted to come in and buy...what would i pay? the whole 400k or just the 350k?
whats the difference in action If the loan is assumable or if the loan IS NOT assumable?
what would buy and seller each do?
would the seller have to keep paying his loan off...and i take out a totally seperate loan and pay that off for myself?
^that doesnt make sense cuz the lender would be paid twice for the same property...thats what makes this an issue for me to better understand...
someone please help :/
and what would be the definition of a wrap around?
~Andrew
hellooo????
You don't have enough information there to really answer these questions. The answer will depend on how you are buying the home from the seller and at what price.
If you bought the property for $400K using conventional methods, you would be paying off the sellers loan and using your own loan.
If you bought the property under a L/O or Sub2 then you would be leaving the seller's financing in place and if you bought for more than what they owned ($350K) then you would need to have some cash, I seriously doubt many would loan in a 2nd position on a deal like that with that little of equity.
VERY few loans are assumable these days.
The reason that you haven't recieved alot of help on this is that your questions have so many possible correct responses that it would take a novella to properly respond.
There is a traditional way that things are done, which is what most people do when they purchase a home, and a myriad of creative options that could take place.
The price you pay is dependant upon the needs of your seller, the most you are willing to pay, and your negotiating skills. Generally Market value of a property is a guideline, not an agreed upon price between buyer and seller.
Other than owner financing there have not been any "Non-Assumable" loans by lenders since late 1987 that I am aware of, so it's pretty safe to assume that you won't be getting any of them.
You asked - "what would buy and seller each do?
would the seller have to keep paying his loan off...and i take out a totally seperate loan and pay that off for myself?
^that doesnt make sense cuz the lender would be paid twice for the same property...thats what makes this an issue for me to better understand... '
1)The seller borrowed money to purchase the home. That needs to be paid off. If you don't have the money to purchase the property, You will borrow money to purchase the home. When the seller sells, Part of what you bring in to pay for the property will go to pay of the seller's loan. Now there is only one loan in place, "YOURS"
A Wrap around is generally a tool used to allow you to purchase a house as follows.
Using some of the numbers from your example:
existing mortgage 350K @ 8% Monthly Payments of say $2605 P/Month
Seller agrees to finance the balance of the 400k purchase price (50K @ 10% APR) Monthly payment to service this loan would be around $439 Principal and Interest.
you and the seller agree to use a "Wrap" which is essentially a contract that wraps both of the loans into one monthly payment of $3044 plus administration fees, property taxes and insurance)
After a specified period of time (this time will have been agreed upon between you and the seller) there will may be a balloon payment due that will pay off all or part of the financing. In essence, you will get new financing to pay off the first loan, and the seller's loan. This new loan will now determine your monthly payments until you pay it off.
Good luck,
Jeff
okay i understand alot better now...i dont have time now but ill be reading over your responses a bunch of times until it sinks in and i start to see the picture more clearly...
thanks for your help its greatly appreciated
~Andrew