Can an investor assume and FHA loan without applying?

Question

Hey Bigger Pockets,

Can a investor assume an FHA loan without having to apply or deal with the bank ? I have a motivated seller of an off marker triplex who owes 145K. Needs roughly 125k, rents are $1250-1300 after rehab. Hard to say what the ARV would be as the subject is 3/1 each unit with 3,710 SQ FT with no triplex comps but a updated fourplex literally two houses down that recently sold for $410,000.  My Plans is the BRRR strategy but worried about the end appraisal as my last brrr appraised 30k less than I expected it would.  So I am trying to be very conservative and figure out the best method with this one. Any suggestions or input is appreciated, thank you!

Saint Paul, Minnesota, Twin cities

Tim Swierczek · Answer

@Rashad K. No all assumable loans require that you qualify.

Scott S. · Answer

@Rashad K. Look into taking over the debt "subject-to" as @Sean Wait mentioned.

I'll bow to @Tim Swierczek's knowledge on assumables, but another tactic to consider is a "wrap mortgage".

That is part of an owner-financed solution that leaves the existing debt in place (if the seller will allow!) but it is wrapped with another mortgage that pays the same amount each month to the seller so they can continue to make the payments to the original lender. (I'm sure someone will say this is illegal or won't work or will trigger the "due on sale" clause but it happens all the time.) A word of caution, though -- don't try this with a LOC. Lenders are extra touchy about those and you don't want the seller to keep drawing on it anyway so those need to be paid off.

Todd Solberg · Answer

Are there assumable loans out there anymore? Banks tell me they don't exist whenever I apply for a mortgage.

John Woodrich · Answer

You would need to provide more information on the area to get any help with the appraised value.  If an updated 4 plex sold for $410, figure the new owner paid roughly $100k per unit.  Under that assumption yours would be worth around $300-325k when finished.  This could be far off if your have more bedrooms, etc.

If you have the ability to complete a $125k renovation I would assume you wouldn't have an issue getting financed.  You would need a down payment in addition to the reno cost however.

Sean Wait · Answer

Are you asking about an Assumption in the normal way or are you talking about doing a subject to?

Can an investor assume and FHA loan without applying?

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