Creative Finance FAQs

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Acquiring a property through a "subject-to" transaction means purchasing a property while keeping the current mortgage intact.  This just means that the current mortgage is mirrored and the buyer takes on the responsibility and adheres to the existing mortgage terms.  This process is validated by the information on lines 203 and 503 of the HUD statement.  Some experienced folks in the real estate field might occasionally express legal concerns about the subject-to strategy. but hey, here's the cool part – the Internal Revenue Service (IRS) actually gives the nod to the subject-to strategy. You'll see the term "subject-to" right there on the HUD statement, and the IRS has all the nitty-gritty details about it in Publication 537. 

When you dive into a subject-to transaction, sellers can breathe easy knowing their protection is our utmost concern.  We do not pretend that there is no risk to the seller. When properties are purchased using a mirror wrap, the same terms as the original contract, is included in a Deed of Trust and a Promissory Note for the seller.  These documents  provide the seller with the protection they need in the transaction.  If we are in default,  the ownership of the property will be transferred back to the original owner.  This is all transacted with the Escrow or Title Company. It's like having a structured, solid plan in place to make sure the seller's interests are locked in and secure throughout the transaction.

Alright, picture this wild scenario: let's say there's some out-of-this-world event, "like an alien abduction", throwing a curveball into the whole payment situation. In that unlikely event, we've got specific verbiage in the purchase contract, that clearly outline the following:  "If the buyer default for at least 30 days, and the the buyer can't meet his/her payment commitments, then the buyer would sign over the property back to the seller or the seller will have the option to foreclose on the buyer."   Either of these options would return the property to the seller. The Deed of Trust enforces this.  Here's the cool part – the seller gets to keep any monies they may have received in the prior transaction, and ownership of the house snaps back to them with all the updates and equity that the property now have.  This allows a fair and systematic fix for those rare instances when unforeseen events, mess with the buyer's ability to keep up with payments. 

Imagine this: a loan servicing company, acting like the unsung hero in the background, takes on crucial roles in handling loans. Think of them as the middleman, making sure everything runs smoothly. They're the ones in charge of collecting payments, sending out those statements, and keeping a close eye on whether borrowers are sticking to their payment schedules. It's like having a trusty sidekick for sellers, offering a sense of security. Sellers can rest easy knowing that their investment is in the hands of a pro – a company that's skilled at navigating the ins and outs of loan administration. 

When a borrower has a mortgage obligation but isn't the one footing the bill directly, the lender has a cool option. Under specific conditions, they can skip counting the entire monthly housing expense (you know, PITIA) when tallying up the borrower's recurring monthly obligations. This exclusion kicks in when the person responsible for the payments is locked into the mortgage debt, has a spotless payment history with no hiccups in the last 12 months, and the borrower isn't banking on rental income from that property for the qualification dance.

To make this exclusion dance happen and make sure the borrower's debt-to-income (DTI) ratio truly mirrors their financial snapshot, the lender needs to get their hands on the most recent 12 months' worth of canceled checks (or bank statements) from the payment wizard. These documents need to tell a tale of 12 months of consistent and on-the-dot payments – no delays, no mess-ups. 

One way to solve this problem and allow the seller to qualify for another loan, is to have a Lease Option in place for the property we are buying,  

To whip up a personalized offer that fits your seller like a glove, you've got to dig into the nitty-gritty details of their current situation. Yeah, it might feel like you're prying a bit, but trust me, it's all for a good cause – creating an offer that's spot-on for them. Here's the essential intel you need to gather for the perfect proposal:

• Full Address (because you've got to know where the magic is happening)
• Remaining Loan Amount (let's get the financial lowdown)
• Interest Rate (because every percentage point matters)
• Monthly Payment (the heartbeat of the deal)
• Assessment of Major Repairs Needed (no surprises here, let's face it head-on)
• Timeline of Closing (because timing is everything) So, with these puzzle pieces, you're all set to craft an offer that speaks directly to your seller's needs and seals the deal in a way that's just right for them.

Once you've shared the initial deets about your property, we'll give it a thorough look and might give you a buzz for a more in-depth chat. After we've dissected all the specifics of your listing, our goal is to lay out a fair and crystal-clear offer that's beneficial for everyone involved. Now, here's the cool part – there's zero pressure on your end to take up our offer. We want to make it clear: the decision to sell is completely in your client's hands.

If your client decides to roll with us, brace yourself for a speedy process. Plus, you get to call the shots on the closing date that fits like a glove with your schedule. We're all about making the selling journey as breezy as a summer day for our clients.