Video Summary

“What is a non-qualifying assumable mortgage?”  Well, let’s first talk about what we usually have from institutional lenders and a mortgage.  They are not non-qualifying assumable mortgages.  They have a clause in the mortgage that says, “In the event that you transfer the property, the loan becomes due and payable.”  That’s called a due-on-sale clause.  So, you will violate the terms of the mortgage if you convey the property to a third party and have them take over your mortgage.

Now, some Veterans’ mortgages are qualified assumable mortgages, meaning that if another veteran is assuming it, he can apply to the Veterans’ Administration and see if they will allow him to assume it.  With regular institutional lenders it’s very difficult and they’ll probably refinance you rather than try to have you assume a mortgage.  So, when do you have an assumable mortgage?  It’s usually with a private investor.  Whenever an individual holds the mortgage and it does not have the language in there that, “This mortgage becomes due and payable at such time as you transfer the property,” or words to that effect.

So, if it doesn’t have language that it is not assumable, then the mortgage can be assumable.  A non-qualifying assumable mortgage would be one that did not contain a due-on-sale clause or a prohibition against someone assuming the mortgage.  You don’t find those very often, and I guess probably 20 or 30 years ago the old FHA mortgages used to be a non-qualifying assumable.  (But I’m afraid that my age is telling on me and at this point there’s not too many of those around to assume or they’re so small that it wouldn’t make any sense to do it.)

99.9 percent of your mortgages out there do have a clause that makes them non-assumable and must be paid in the amount they’re transferred.  However, if you choose to go ahead and just take over the payments for someone, I must say that most institutional lenders have not been exercising their right to call the loan due and payable, and they’re just happy to get their payments regularly.  There are some problems with taking over a mortgage that is not assumable, so if you have any questions or would like to work out some creative financing, give me a call at (727) 847-2288.

Video Summary

What’s a purchase money mortgage?  A purchase money mortgage is usually associated with what they call seller financing – that’s whenever a seller is going to finance the property for the buyer.  An example would be if they sold the property for $100,000.00 and they took $20,000.00 down and took back an $80,000.00 mortgage so that the buyer would pay directly to the seller the $80,000.00 promissory note mortgage.  Well, that would be a purchase money mortgage.  A purchase money mortgage could also be considered by a lender who furnishes the money for the purchase of the property, and therein lies the name “purchase money” in that the money that is used from the lender is used to purchase the property.

What is the significance of a purchase money mortgage versus a different type of mortgage that you could have as far as acquiring the property?  Well, that has a higher priority so that if there were any other liens and placements – say a judgment lien against the purchaser of the property – a purchase money mortgage, even though it’s reported after the judgment is against the purchaser of the property, would still take priority in the event that you would ever have to enforce the mortgage through a foreclosure action.  So purchase money mortgage is received by a lender in the form of a mortgage whenever they supply the money for the purchase of property, and therein lies the name “purchase money mortgage.”

If you are looking to sell your property and would like to have a note and mortgage prepared, let me know and give me a call at (727) 847-2288.  Thank you.

Video Summary

What is P.I.T.I.?  That’s a term that is used when getting a mortgage through an institutional lender.  It stands for Principal, Interest, Taxes, and Insurance, and relates to what your monthly mortgage payment will include, which will be a portion of the principal, the interest, a portion of the taxes, and a portion of the insurance.  How they calculate that is, of course, amortized which means they spread out your payments over a certain period of years in order to come up with that dollar amount.  They divide the amount of your insurance by 12 and come up with a monthly amount, and do the same thing with your taxes to come up with your monthly payments in order to come up to your total monthly payments which will include PITI – which is Principal, Interest, Taxes, and Insurance.

If you have any questions about your mortgage, give me a call at (727) 847-2288.

Video Summary

What is a wraparound mortgage?  Wraparound mortgage is usually associated with what you call creative financing wherein an owner finances the property.  When they finance the property they have an existing mortgage and they agree to accept a larger mortgage from the buyer.  The buyer pays a larger mortgage to the seller.  The seller then, in turn, continues to make their payment out of the first mortgage.  An example of this would be: let’s say a seller owes $50,000.00 on this property and he sells his property to a buyer for $100,000.00.  The buyer only has $20,000.00 to put down, but the seller agrees to hold an $80,000.00 mortgage and that would be a wraparound mortgage since they would be making the payments or collecting the payments on $80,000.00.  They in turn would be responsible – the seller would be responsible for paying the underlying first mortgage in that they would not satisfy their first mortgage.

There are problems that can be associated with this in that the buyer may be concerned that the seller may take his payments and not pay his first mortgage, so we have to use care in assuring the buyer that the seller pays their payments so that they don’t get foreclosed upon.  Also, almost with all institutional mortgages there’s what they call “due on sale clause” meaning that whenever the property is sold or transferred then the loan can become due with payable.  With as many defaults of mortgages these days, there’s usually not too many lenders that are hauling along due with payable, but it does get complicated when dealing with the insurance and how the loan – the taxes – come out in the new buyer’s name.

The wraparound mortgage is a little complicated.  It’s a way of doing creative financing.  There certainly needs to be some guidance from a good real estate lawyer if you’re going to consider either taking back any wraparound mortgage, or if you’re a buyer and you want to give the seller a mortgage and they’re not going to pay off their underlying first mortgage.

So if you have any questions about a wraparound mortgage, give me a call at (727) 847-2288.

Video Summary

When do you need a title search in a real estate transaction? You usually need a title search anytime that you transfer the property or sell the property to a third party. They’re going to want to know whether or not there are any liens against the property. Many people say, “Well, I know there are no liens on it.” However, usually your word is insufficient, so they want a title search or title insurance to ensure that they have marketable title to the property and to insure them against any hidden liens or other problems that were in the chain of title prior to the present owner selling the property. Also, title searches are needed whenever you mortgage the property in that the new lender is going to want to have title insurance to ensure that there are no outstanding liens and who the owner of the property is.

Title searches are conducted in order to have title insurance issued. That’s something that the attorney or the title company reviews. They are now computerized. You can do what they call an ownership and encumbrance search fairly inexpensively if you just want to check to see if there has been any change in the ownership. However, you don’t have any assurances if it’s not accurate; if liens do come up you don’t have any insurance against it. Anytime that the property changes hands, it’s a good idea to get a title search just to make sure that the proper properties were signing the deeds and that there are no mortgages on the property or liens that either the seller or the buyer didn’t know about.

If you transfer in some property and want some title insurance or get a title search, give me a call at (727) 847-2288. Thank you.