Section 6, Unit 3: Loan Assumptions, Modifications, and Seller Financing

Jacob is selling his unencumbered property to Shem and is acting as lender in the transaction. Which type(s) of finance instrument can Jacob use for the loan agreement?

Note with mortgage, note with deed of trust, or contract for deed

Leslie has applied for a loan modification. As part of the process, her lender will likely ______.

Perform a title search

When a real estate transaction is financed using a contract for deed, what advice should real estate agents give to their clients?

Have an attorney review the contract.

Violet purchased a house from Nick, and assumed the existing loan. Nick wants to make sure he isn't liable if Violet ever defaults. What can he do to remove his name from the loan agreement?

Request a novation

How is a loan assumption documented?

The buyer and seller both sign an assumption agreement.

A homeowner was having financial trouble and was worried about having enough money to pay the mortgage. Instead of falling behind, the homeowner met with a representative from the mortgage company servicing the loan. As a result, the mortgage payments are lower, and the homeowner is no longer at risk of missing a payment. Which one of the following options could be a reason the payments are now lower?

The lender modified the homeowner's loan terms.

Ralph and Mort are neighbors. Ralph is selling, Mort is buying, and Ralph is offering a second loan to help Mort with his down payment, using a contract for deed. When Mort presents this idea to his lender, his lender balks. Why might that be?

Lenders don't like contract for deed arrangements.

Bob is selling a four-bedroom house that he bought as an investment property. Victoria would like to buy it, but she has a low credit rating and can't find a bank that will offer her a loan. After reviewing Victoria's financial situation, Bob feels confident that she's an acceptable risk. He offers to extend her a line of credit for the purchase in the form of a contract for deed. What issue should Bob be aware of?

Victoria could cause an involuntary lien to be placed on the property.

Ronald is having his existing loan modified. During the application process, why will Ronald's lender perform a title search on his property?

The lender wants to ensure that an existing lien won't take priority over the modified loan.

When is a loan modification considered?

When a borrower has missed payments but still has some financial security

Denzel's loan payments have been reduced because his lender agreed to extend the amortization schedule stated on his note. This is the result of a ______.

Loan modification agreement

Maggie has a neighbor, Jim, who is facing foreclosure. She likes Jim and wants to help him out, so they agree to do a "subject to" purchase. What does this mean?

Maggie will take over Jim's loan payments without telling his lender she's doing so.

Babs is buying Kirk's property. Babs needs help with the down payment, and Kirk offers to supplement Babs' bank loan with a second loan, allowing her to meet her lender's down payment requirements. Which finance instrument(s) may be used for the agreement between Babs and Kirk?

Mortgage or deed of trust

Lisa, a seller, is providing Darwin, a buyer, with a seller second on the purchase of her property. Darwin's conventional lender uses a note with deed of trust to secure the first loan. What instrument is Lisa most likely to use for her second loan with Darwin?

Note with deed of trust

Which of the following is a potential concern of a buyer who's entering into a contract for deed with a seller?

The buyer could lose the property after missing only one mortgage payment.

Which one of the following statements is true for a sale that's subject to an existing mortgage lien?

The seller's credit score may improve although he's not making any mortgage payments.