Questions for multifamily commercial: assumable loan

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Questions for multifamily commercial: assumable loan

Eddie Starr
Specialist · fremont, NE · Member since 2014 · 161 posts · 42 votes

Hi BP!

I've been looking at a few different MFH types, from plexes to mhp, and I've seen some listings where assumable loan is the only purchase method, or one of the options.

My 1st question: Let's say it's a MHP that's going for 300k, assumable loan. Does that mean that the total of the original loan was for 300k, and that I'd be paying the balance? Or does that mean I'd need to assume a brand new loan, to begin making payments on it, to buy the prop?

On assumable loans, will the bank or other lender want to review my finances, credit report [score/fico], etc? Or, as long as the prop is still generating revenue, to pay the monthly rate, they lender won't do so?

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  • Joel OwensBusiness Member
    Moderator
    Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
    12y

    Some properties have assumable loans as an option. You typically would be assuming whatever the balance of the loan is at the time of closing.

    The difference in sales price versus loan balance is the equity (down payment) the seller wants. Now what kind of note is it? Bank loan or private party etc. Some properties you have to assume the loan because there is a big pre-payment penalty. You might not want to assume the loan as the interest rate is high, loan is coming due in a few years, etc.

    A private party on a loan might not qualify too much it varies. If it's a bank loan assumption they WILL want to see all of your personal records. Especially if the loan is recourse. The bank wants as strong or stronger individual assuming the loan than who is currently there.

    Sometimes there is no pre-pay penalty on the loan and you can go get a new loan instead with less down payment and better terms etc. It's more complicated than this but hope it helps.

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