Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
About 7 years ago my Aunt lent me her credit to purchase a house because at the time my credit was poor. I've been living and paying for this home as if it was my own, Its an FHA loan and is assumable. I am now in a credit/financial position to assume the loan. We contacted the bank and explained the situation. The loan officer is telling me that an assumption is more of a hassle and that a straight purchase from my aunt would be a better option. I feel that he would earn a better commission with a purchase than an assumption and his pay check is more of an interest for him than the better deal for me.
My question is, what is my best course of action??
The current numbers are: amount owed $195k estimated value $370k. Fico 725 (middle)
no my name isn't on the title only my aunts. She doesn't require any amount of money from equity.
I'm guessing the reason they're recommending you not assume the loan is that an FHA loan carries mortgage insurance you don't need given the equity you have built up. On the other hand, what's the interest rate on the loan? Seven years ago, FHA rates might've been under 3%. They sure ain't that low now! I'd ask for a loan comparison of assumption vs. purchase, so you can see the payment, interest rate, and closing costs for both.
It's definitely possible that the loan officer has his paycheck in mind over your best interests. The bank won't collect an origination fee for an assumption, and the loan officer's commission would come out of that.
I don't know how much of a "hassle" an assumption is. Your aunt is going to have to deed the property to you via a bargain and sale deed. That'll cost you whatever doc prep and recording are where you live (around $100 for recording).
Definitely compare the interest rates- I bet they've gone up and the bank would be much happier loaning money to you with a new loan at a higher interest rate. (This is one reason I'm pleasantly surprised that the mortgage is assumable.)
Also, note that, while your monthly payment under a new loan might be lower, it's because it starts the clock ticking again and extends the life of the loan another 7 years. Let's say your Aunt took out a 30-year mortgage in 2012; it would be paid off in 2042. If you replace it with another 30-year loan it won't be paid off till 2049. You're also financing a lower principal amount since you've paid off some principal in the last 7 years. Don't let them sell you solely on the basis of monthly payment- compare interest rates, including any points paid at closing.
Thank you Docwrangler! The loan is currently at 4.25 and yes PMI is about $150. I was wondering if I could just refi, leave my aunt on the deed, have her add me. Then after a year or so quick claim her off. I'm looking for the best money saving least hassle option.
I really appreciate your time.
Thank you Docwrangler! The loan is currently at 4.25 and yes PMI is about $150. I was wondering if I could just refi, leave my aunt on the deed, have her add me. Then after a year or so quick claim her off. I'm looking for the best money saving least hassle option.
I really appreciate your time.
This solution is almost the exact same as a purchase.
The best solution is to get a real estate attorney to draw up the paperwork and for you to get the purchase loan (which would likely have better terms than a refi).
It depends upon your mortgage company but if it was your dad, mom, sister or brother, for instance, assumption should be relatively simple. I'm not sure if they consider an aunt as the same.
At 4.25%, I would maybe consider doing it as a purchase. You can get in around there right now - probably closer to 4.5%, but when you drop mortgage insurance, your payment is going to be lower.
One thing I would suggest is, depending on the rate you get, to look into doing a 20-year rather than a 30-year mortgage. You've already got 7 years into it. It would be a shame to go back to 30. Of course, tons of people do it, so don't feel guilty if that's easiest for you to afford.
On the question of purchase vs. refi:
In order to do a refi for an equity buyout (this is called a limited cash-out refi), you would have had to be a co-owner of the property for 12 months. Now, if you really want to do a refi, you can have your aunt put you on title now, and revisit this in a year. If you want to do it now, it either has to be an assumption or a purchase.
Hope that's helpful. I'd still ask the loan officer to give you a loan comparison with the costs of a purchase vs. an assumption. That way you have all the info needed to make an informed decision.
I am curious. How many loan assumptions are y'all seeing? i don't think I have seen more than one in the last 10-15 years. And that guy worked in the mortgage department of the bank agreeing to the assumption.
If you are seeing them, are many different lenders doing them? Where in the country are you?
About 7 years ago my Aunt lent me her credit to purchase a house because at the time my credit was poor. I've been living and paying for this home as if it was my own, Its an FHA loan and is assumable. I am now in a credit/financial position to assume the loan. We contacted the bank and explained the situation. The loan officer is telling me that an assumption is more of a hassle and that a straight purchase from my aunt would be a better option. I feel that he would earn a better commission with a purchase than an assumption and his pay check is more of an interest for him than the better deal for me.
My question is, what is my best course of action??
The current numbers are: amount owed $195k estimated value $370k. Fico 725 (middle)
no my name isn't on the title only my aunts. She doesn't require any amount of money from equity.
Thank you.
I would make sure it's best for you and not what's best for the bank. Find out the FHA rules when you bought. They often change and maybe back them the MIP was only until you had 78% ownership, if so you can just get an appraisal, keep the loan and lose the MIP/PMI. When I read about mortgage assumptions it did not have to be a family member so I don't think that's an issue.
If you don't have good Homestead laws in your state make sure you get on the loan and she gets off if she's elderly and incurs medical bills or nursing home care.
An FHA loan assumption is generally possible-for most FHA loans closed today, the lender’s participation and approval will be required in order to carry out a loan assumption transaction. There are also occupancy requirements which may apply depending on what year the original mortgage was closed in. From HUD 4000.1:
“If the original Mortgage was closed on or after December 15, 1989, the assuming Borrower must intend to occupy the Property as a Principal Residence or HUD-approved Secondary Residence
If they tell you it's a hassle tell the to put that in writing. Hassle means there is work that they would need to do that they can't profit from. As long as they let you, you do not want to have thousands of dollars in closing costs that a new loan may add.
I would go in and record their answer when you ask them what they mean that it's a hassle. If you are in a public setting where you can be overheard you do not need permission.
Last edited by LifeIsGood01; 03-28-2019 at 04:02 PM..
I am curious. How many loan assumptions are y'all seeing? i don't think I have seen more than one in the last 10-15 years. And that guy worked in the mortgage department of the bank agreeing to the assumption.
If you are seeing them, are many different lenders doing them? Where in the country are you?
Thanks!
I have never, ever seen one. Started in 2000 and have been FDIC the entire time, every loan type in every state.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
