Will a bank refinance a home you bought with a wrap?

[Jordan Archer]

Hey BP,

This is something I want to know in order to reassure some of my buyers...

So, I want to buy/acquire homes subject-to. I then want to find a buyer (one who can't get conventional financing/loans) and sell the property to them with a wrap mortgage. (These are all techniques I heard from podcast #70 btw).

I'm wondering now, will a bank give my buyer a conventional loan on that property later on when the buyer's credit improves? This mortgage would of coarse be used to pay off the original loan that I would take over subject-to.

I'm wondering, because I want to make sure I can assure my buyers that they will be able to refinance the home later on from a bank, hence making this a smart purchasing option for someone not able to currently acquire a loan.

Thanks BP!

[Albert Bui]

Yes you can get a "rate & term," refinance on a wrap assuming your income, credit, and assets meet requirements to qualify. It also depends on your definition of a wrap, if by wrap, you took legal title and agreed to be obligated to a pay a note that covers the prior sellers note then yes.

The underwriter with conventional financing will need to look at the purchase contract, final HUD settlement statement, and to verify that you've made on time payments so far on this wrap loan to ensure there is a good payment history prior to the submission of the rate/term refinance.

If you took legal title and were obligated on the debt you should be able to refinance out.