Are you planning to transfer your mortgage ownership? Transferring mortgage ownership in the United States is similar to assuming a loan. Usually, the transaction does not change the length or perhaps the terms of the loan. But this removes owner from any financial and legal responsibility from the debts. This kind of transfer, adds a third party legally responsible for the loan repayment. For some people, mortgage ownership transfer is a desirable option. However, this practice is very common nowadays but some mortgage companies do not permit this to happen.
Below are the steps to follow when transferring a mortgage:
• Situation assessment
One can immediately qualify to transfer a mortgage ownership depending on the situation of the sales. Any lender cannot avoid the transfer in case;
• It results from the inheritance
• The owner will leave the home
• When the joint tenant dies
• Divorce situation
These ownership transfers are the options among Veterans Affair (VA) and Federal Housing Administration (FHA) loans if the new owner meets the requirements for credit.
• Review of the mortgage documents
The mortgage documents must be reviewed to make sure that the transfer mortgage ownership is considered an option. The important factor is that the mortgage must include “due-on-sale” clause. In case it includes, the lender has the authority to call for a full payment at the closing. Although this does not really mean that you cannot transfer the mortgage ownership, the decision usually depends upon the bank’s requirements.
• Get the requirements for the mortgage transfer
To get the requirements for your mortgage transfer, contact first the VA, FHA, or perhaps the lender. The FHA has credit worthiness requirement in which the new owner should follow. It also requires the new owner to present a release of liability form before it will be approved for the mortgage transfer. However, the VA requires that the loan must be current with regards to payments, credit requirements, and submission of release of liability.
• Compute the debt-to-income ratio (DIR) of the new owner
In case you are moving from the loan, your earnings can’t be used to aid the loan. In order to compute the DIR, you must divide your total monthly bills by the gross monthly income. However, the refinancing is not possible if the mortgage DIR exceeds 40%.
• Look for other mortgage lenders
You can look for some other mortgage lenders and use as credit guide. Most banks and credit unions offer the best programs. However, they only cater those borrowers having scores of above 720. Finance firms extend mortgages to clients with lower scores but they charge higher fees and interest.
• Perform transfer
Consult with your lawyer for assistance and advice on mortgage ownership completion transfer in terms of inheritance, divorce, and joint tenant. For others, the outlined process must be followed from the VA, FHA, and other lenders.
However, bear in mind that if the new owner does not meet the required credit guidelines, the transfer will not be approved. The credit review and the loan processing usually take 45 days. You must also aware that you are still responsible to pay the loan until the transfer closes.
One good option in order to transfer mortgage ownership is through assumption of mortgage. This is by means of taking over your own mortgage. If your loan is backed up by the FHA, it can be assumed provided you have it for few years. The lender must approve the assumption and the person who assumed the loan must have a good credit score.