Can I Assume My Neighbor’s Mortgage?
Today’s question raises several issues that are often misunderstood…
“The house next to mine has received notice of default. If I pay his note current and add substantial collateral, will his bank consider allowing me to assume his mortgage?”
First let’s define exactly what is happening. Notice of default is received by a homeowner from his lender when he is more than 30 days past due on a mortgage payment. It is the first step toward foreclosure. After this he will receive additional notices over time, detailing his rights to bring the loan current and breaking down the costs that are accruing. The time frame between notice of default and the foreclosure sale is about 5 months in the state of Washington.
Based on your question, it sounds as though your neighbor is somewhere in that 5 month period. Almost up until the date of the foreclosure sale, you could buy your neighbor’s house by paying him enough money to clear everything he owes against it plus his costs to close the transaction (about 2% of the sales price). Obviously, you would want to use an attorney or a real estate agent and an escrow agent to draw up an agreement between the two of you, handle the money and clear the title. DO NOT just give money to your neighbor.
As to whether you can assume his mortgage, the answer is probably no, and there is no advantage to you in doing so. Basically, you are asking them to give you a loan. The foreclosure department and the loan department in a bank are completely separate, and there is no benefit to the bank to modify that loan into a different name. They may give you a loan, but you will have to go through the same process with them that you will with any other lender.
If you really want to buy the house, reach an agreement with your neighbor, put it in writing, turn it in to escrow and go get the best loan deal you can find.
For more information on Bellingham Real Estate or to search for homes in the Bellingham and Whatcom County area visit www.JohnsonTeamRealEstate.com, your one stop Bellingham real estate and community information resource!
Subscribe by RSS
Subscribe by Email
Follow on Twitter
Yeah, don’t just give money to your neighbor!
It sounds like a good option would be to ask the bank to accept a short sale offer, but I’m not a real estate agent. Do you think this is an option, Lylene? I’m not sure how common short sales are in Washington.
Hi,
I am not sure if I should buy a Condo or Home in Iowa city.
Looking for help.
Thank you.
We are seeing more short sales asked for than received, but they are definitely a part of our market. In the scenario presented by the quesion, however, a short sale really doesn’t change the basic situation, which concerns how the purchasing neighbor would get the money to buy – he was wondering about assuming the existing loan, which is not likely. While it is possible that the current homeowner is underwater, it is also possible that he just can’t make the payments. If that is the case, a short sale isn’t necessary – he just needs to find someone to pay him enough to pay off the bank.
If he is underwater, a short sale will still require the buyer to come up with financing. A short sale purchase is not for the impatient or the faint of heart. Even the “good” ones take a long time, no one involved is happy, you are most probably dealing with a corporate entity where you never talk to the same person twice, and decisions often seem arbitrary. I would not recommend trying to do one without help from an attorney or a truly experienced real estate agent.
Hi Maxine,
I can’t help you with property in Iowa city, since I don’t know the market there, but interview some agents and find someone who does. You should be looking at two aspects – what is the market like for each type of property and, most importantly, what is the best lifestyle for you? Good luck!
Hi Maxine,
I am a Realtor from Iowa City. I have information that you should read about the Pros & Cons of buying a Condo vs. Home.
http://www.michaelmceleney.com/custom3.shtml
Please let me know if this helps.