Sub 2 and Debt to Income Ratio for Seller

10 Replies

So this is probably a case of me trying to make a deal where there is no deal but in the interest of being able to have options for the seller...

If you buy a house subject to existing financing, does that debt no longer count towards their debt to income ratio if they're trying to buy something else? If not, what can be done for them? They only owe $30k on a $200k house. Thanks!

The debt will count toward them unless:
1. They have an assumable mortgage (not likely at all).
2. You assume their mortgage. You will need to meet all the lien holder's requirements.

Also, where is the residual $170k coming from? Can you provide more details?

If you buy subject to, it means the original mortgage is still in place, so yes it is still on their credit, it takes a novation or a new mortgage to remove that debt from their credit.

Thanks @Mark Bookhagen and @Jerry W. , That's kind of what I figured was the case, but was hoping otherwise. As far as the difference... that's something else that would have to be figured out. I guess all I can do is make my offer and see right? Time and circumstance?

I think you may be trying to force this assumable mortgage idea. The time you use it is when the current mortgage of the seller is a bit lower than the purchase price. Normally, you'd make up for the difference between the purchase price and the current mortgage with a cash "down payment" to the buyer. With only a $30k mortgage and assuming you aren't going to put $170k down, I don't think this is the spot to use that strategy. You are going to need a regular mortgage anyway unless they are willing to hold the note for the remaining $170k (less your down payment).

Thanks Mark, you're absolutely right. When you first start out you see opportunity everywhere and assume there has to be a way to turn it into money. I'll just have to keep plugging away at my marketing. Thanks again.

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Autocorrect is killing me. Sorry... Dante.

Thanks Mark!

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