Wrap Mortgage for first time into real estate?

Question

Hello all!

I just learned about the Wrap around mortgage. Is it too good to be true? I have been wanting to get into a real estate property and live in an expensive area ($300-400k average home) but came across a couple pre-foreclosed homes and thought this would be a good way to get started? Would love to hear your thoughts and the downside to this option?

https://www.zillow.com/homes/1049-4th-St-W-Kalispell,-MT-599...

Jay Hinrichs · Answer

there are not a lot of downsides for you as the buyer when your do a proper wrap. the risk is on the seller who transfers title to a property that still has a loan in their name.

Now that all said  google  "All Inclusive Deed of Trust"  state of California.. this is the document that has been in use since at least the early 80s to properly wrap a mortgage. WE did little a thousand of these in the 80s .. we had a company called CA wrap even :)

get a copy read it and see how it gives protections. And then ask your title company or escrow company in MT if they have seen these or if they have their own version.

Andrew Postell · Answer

@Micah McAlister good comments above and yes, wrapping a mortgage is a fairly common technique.  Just need to qualify for your loan that will wrap over the existing loan and keep going.

Caleb Christopher · Answer

That's a great way to get into a property. Especially if you can find a distressed seller who'd be willing to leave their loan in place. You actually help the seller in multiple ways when you do that! You reinstate their loan (if it's in foreclosure), get payments back on track, and keep the now-performing loan open and in good standing. The age of a credit account is an important factor for credit scores, so by making his mortgage payments, you're helping his credit get and stay on track faster than it would have otherwise!

I just wrote a BP blog to explain the types of wraps: Wrap Mortgages Explained.

Wrap Mortgage for first time into real estate?

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