Rental Property Investor · Tampa Bay Area, FL · Member since 2019 · 22 posts · 19 votes
*Asking for a friend, he hit me up about this topic and it is something I don't know much about.
My friend (who is active duty military) is looking to buy a newly built property (built 2018). The current owners recently retired and want to move out of state and are looking to transfer the mortgage vice selling the property. The sellers have only owned it for 1 year and are not looking to make a profit. My friend's idea is that on the positive side, the buyer and seller would avoid closing costs and realtor fees. However if there any red flags or things come up, he does not know what he should look out for? Seems too good to be true in his opinion. What advice should he have? I has orders to that area (Camp Lejeune NC area) and moves in May. He has his VA Loan in full if he wants to use it. He can only afford to put down 3.5% as a down payment if needed.
Rental Property Investor · Greenwich, CT · Member since 2015 · 4k+ posts · 2k+ votes
6y
First and foremost, @Autumn Whittington, your friend needs to determine if the mortgage is assumable. Not all are. I know FHA allows it, but of course, there's no telling the terms of the elderly couple's note.
A few other things to consider:
There will still be closing costs. Lawyer, title company, maybe an appraisal, etc.
The lender will have to approve your friend before the assumption could take place.
If the current owners put 20% down, they're going to want that back at "sale." If your friend only has 3.5%, that leaves a pretty big hole to be filled.
Honestly, this seems like a complicated way to purchase a home. Especially, since he's not really getting a deal and has a VA benefit available. I don't see too much upside.