Typically, the official way to take over payments on home foreclosures is through assumable loans. In 2010, there were not many assumable mortgages available, with the exception of some VA (Department of Veteran Affairs) and FHA (Federal Housing Administration) loans, which may be assumable without lender permission and without qualifying. An assumable mortgage allows you to take over the owner’s mortgage payments without obtaining new financing or a new interest rate. However, it still requires lender approval and a credit check to ensure you qualify to assume the loan.
- Find a homeowner who needs to sell due to default. Finding one in the pre-foreclosure phase is ideal, so you can work out a deal before foreclosure impacts the owner’s credit history. Advertise in the newspaper, place signs or distribute fliers in neighborhoods of interest to find homeowners who have already received a default notice from their lenders.
- Consult with a real estate attorney to learn about the possible drawbacks when you take over payments on home foreclosures. To find a lawyer who offers free consultations, check your local phone directory or ask family and friends for referrals and make an appointment.
- Talk with the homeowner once you have located a property of interest. If the homeowner is already in default and facing pre-foreclosure, determine how much is owed, including any late fees. Armed with information received through your legal consultation, approach the owner with the idea of taking over the mortgage payments to help avoid foreclosure.
- Obtain written permission from the owner and send or fax to the mortgage company, which will allow you to talk with the lender about the details of the owner’s existing mortgage. Whether the mortgage is assumable or not, you need to get approval for the deal from the lender and pass a credit check just as if you were applying for an initial loan. Taking over payments on a non-assumable loan can present a good deal of risk for everyone involved, so you need to ensure everyone is in agreement on the exact terms of the deal.
- Prepare a contract with your real estate attorney. Include all details about how ownership of the property will be transferred to you. A few different options exist for you to take over payments on home foreclosures: mortgage assumption; seller financing; rent-to-own; or an agreement between you, the seller and lender for you to take over payments while the seller transfers the property title to you. Then, you obtain your own financing.