In a down economy, when obtaining home financing is extremely difficult, getting seller financing is often times a great way to help each party involved with both sides of the transaction. One type of seller-assisted-financing is the Wrap-Around mortgage. In a wrap-around mortgage, the seller will have equity in their home at the time of sale in Montrose Alabama 36559, have the borrower pay them directly, and continue to pay on their own mortgage, pocketing the remainder to cover the equity that they let the borrower finance. Sound confusing? Click on the link above to get a more detailed breakdown of how these things work.
In a down economy, with financing difficult to achieve, more and more people – both sellers and borrowers – would like to take the “Wrap-Around” approach. While this type of financing certainly has its advantages, it definitely has its drawbacks too, and these drawbacks are not small.
Let’s get this party started by listing the Pros:
1. Often times a borrower is credit-worthy, but tightened, non-liquid credit markets are providing financing only to those with perfect credit, income, and savings history. Having a difficulty in obtaining financing makes a difficult market even worse for those looking to part ways with their house. A Wrap-Around mortgage, allows the seller to basically call the shots when it comes to who can and cannot purchase their home.
2. The ability to get seller financing, when direct bank financing simply is not an option, as detailed above, certainly is a big plus for both parties. Additionally, if rates have gone up substantially since the seller got their original loan, this mortgage can allow the buyer to pay them a below-market rate, a plus for the buyer. The seller will maintain a higher rate, compared to when they negotiated their initial financing, so they can keep the spread, a big plus for the seller. For example, the seller’s initial 30-yr fixed had a rate of 5%, but currently the average 30-yr fixed is 7%. The seller charges the borrower 6%, while the seller keeps the extra 1% and the borrower pays 1% less than they would have, if they were to obtain traditional means of financing. Win Win in Montrose Alabama 36559!
If it sounds too good to be true it probably is–Con time:
1. If the seller does not have an assumable mortgage and el banco finds out that they have deeded their property to someone else, but have not requested their mortgage be assumed by a new party, then they may “call the loan” and foreclose on the property. The borrower may have been current on payments, but gets kicked out of their house. In a difficult market when people are not making their payments, banks (not surprisingly) become less concerned with the source of the payment, and far more concerned with whether or not the payment is being made. So don’t expect this to be enforced if the mortgage is being kept current.
2. If the bank has a “due on sale” clause, and it is not revealed to the bank that the property has changed hands, the same issue as listed in #1 can occur. The borrower is current on the loan, but the seller never informed the bank of the sale, then mama bank gets angry and forecloses. The poor borrower is living in a box a for a few months after moving into their new home and paying the seller on time every month.
3. The biggest concern/con for the seller is that the borrower doesn’t pay their mortgage on time. One benefit to a wrap-around vs. a straight mortgage assumption is that the seller at least knows when the borrower is paying late and can make the payment to the bank for the borrower. However, in a case like this, the seller is essentially paying for someone else to live in a home. Not fun.
4. Some “wraps” have the seller either paying the bank directly or through a third party. If this is the case, and the borrower is late, then the seller has their credit dinged and risks losing the home in Montrose Alabama 36559.
Wraps are great if both parties play by the rules. It’s important for the borrower and seller to know the risks of a “wrap-around” and make the proper preparations to mitigate them.
Surrounding Areas In Alabama
Video: Mortgages in Montrose AL
Zillow has 25 photos of this $227900 4 bed, 2.0 bath, 2331 sqft single family home located at 104 Carlisle Cir built in 1993. MLS # 1056874.
Zillow has 45 photos of this $948355 5 bed, 6.0 bath, 7060 sqft single family home located at 105 Alsway Ct built in 1996. MLS #.
According to our research of Colorado and other state lists there were 33 registered sex offenders living in Montrose, Colorado as of June 19, 2017. The ratio of ...
Home Finance Center Search local lenders to find the best mortgage rates in your area.
Searching for Christian home lending? Fellowship Home Loans offers mortgages, loans, and home refinancing based on Christian principles. Contact us today!
Get Baldwin County, Alabama and surrounding communities breaking news, weather, events and more. Comment on the news, see photos and videos, and join forum ...
Alabama State Senator Lee "Trip" Pittman announced Wednesday that he will run for the U.S. Senate seat this summer. Pittman said he decided to run after learning that ...
Compiled from Alabama MLS listings and regional databases of Mobile, AL homes for rent: 424 total rental listings, 2 apartments for rent, and 17 condos for rent in ...
To view your information: Enter the information into one of the fields below then click on the submit button. NOTE: If you are experiencing problems with the site ...
Homes For Sale BB234 McKie’s Hill Land (Gem on the Hill) 6 005@ 25.00 psf. November 4, 2016 by Sean Samuel · Leave a Comment . Ref: BB234 Gem on the Hill (McKie ...