Wrap Around Mortgage

[Summit Aryal]

Hi everyone, this is my first post here. It's regarding Seller Financing.

I want to purchase a house in Houston that is owned by my cousin. As the interest rate that I'm getting is over 5.875% nowadays I was thinking about doing seller financing with him. He is willing to do 4% interest on the house after I pay him 20% down payment. We have agreed on a price of $300k for the house (which is fair for this house). However, this house is not paid off. Which is why I was thinking about doing a wrap-around mortgage on it. He has never done seller financing before. This is going to be my first house purchase ever, so I do not really know how to proceed. Here are the questions I have - 

1) Where do I look for the due-on-sale clause? 

2) When I do Wrap-around mortgage, is the title going to be transferred to my name? Is he still going to be on the title?

3) How do I proceed with this deal? Who should I talk to to get this deal going?

Any input is appreciated. Thank you! 

[Andrew Postell]

@Summit Aryal so this is a very delicate topic.  The state of Texas just changed rules for owner-financing this February.  Now, it's doubtful that you or your cousin would enact state law on each other but you certainly need to get with someone that can show you how to properly structure everything.  I'm going to answer your questions here but please know that there are other things you need to know as well:

1) Where do I look for the due-on-sale clause? - It's in the "Note" of your cousins paperwork.  I wrote an entire post on this topic alone here: https://www.biggerpockets.com/...

2) When I do Wrap-around mortgage, is the title going to be transferred to my name? Is he still going to be on the title? - Yes, it will be transferred to your name.  You are purchasing the home.  Your cousin's name would be removed from title since you are purchasing the property from your cousin.

3) How do I proceed with this deal? Who should I talk to to get this deal going? - You need to speak with a good title company.  I would recommend reaching out to other real estate investors in Houston to know who to use for this.  Visit some groups.  Post on their facebook pages.  Make sure you have someone that knows EXACTLY how to do this.

[Summit Aryal]

Thank you so much @Andrew Postell! This is exactly what I was looking for. Your post on "due-on-sale clause" explained pretty much everything I wanted to know.