Here’s a comprehensive list of possible questions about the Assumed Financing Addendum, with explanations for each:
- What is the purpose of the Assumed Financing Addendum?
It outlines the terms and conditions when the buyer agrees to assume the seller’s existing mortgage instead of obtaining a new loan.
- What details about the existing loan must be disclosed in the addendum?
The loan type, interest rate, monthly payment, balance, lender’s name, and whether the rate is fixed or adjustable should all be clearly stated.
- Does the buyer need the lender’s approval to assume the loan?
Most loans require lender consent for an assumption, and the addendum specifies that the transaction is contingent on lender approval.
- What happens if the lender refuses the assumption?
The addendum should clarify that if the lender denies the assumption, the buyer can cancel the contract and recover their earnest money deposit.
- Who is responsible for the lender’s assumption fees?
The addendum designates whether the buyer, seller, or both will cover costs such as application fees, processing fees, or attorney fees related to the assumption.
- Does the loan’s due-on-sale clause apply?
Many loans have a due-on-sale clause allowing the lender to demand full repayment upon transfer. The addendum addresses how this is handled in an assumption scenario.
- What happens to the escrow timelines if lender approval is delayed?
Since assumption approvals can take time, the addendum may allow for automatic extensions to close of escrow until the assumption is finalized.
- Will the buyer take the loan “as-is” or request changes to terms?
The addendum often specifies that the buyer is accepting the loan under the same terms the seller currently has, without renegotiating the interest rate or payment schedule.
- Does the seller remain liable after the loan is assumed?
Some loans do not release the original borrower from liability. The addendum should address whether the seller receives a release of liability from the lender.
- Can the buyer make additional principal payments or refinance after assumption?
The addendum may include provisions on whether the assumed loan can be paid down early or refinanced without penalty.
Disclaimer:
The questions and answers provided are for general guidance only and may not cover all details or apply to every situation. If anything is unclear or you need further clarification, please visit car.org for official resources and the most up-to-date information from the California Association of REALTORS®.
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