Legal Question in Real Estate Law in Illinois

Re: Assumable Mortgage: Overlooking Anything/ Time Frame?

If I understand your question correctly, you are going to buy a property and get an assumable loan. Later, you will sell the property to your friend with limited credit, who will assume your loan. Perhaps I misunderstood, and you are trying to have your friend assume the loan without actually buying the property from you?

An assumable loan is a loan that can be assumed by the new purchaser when he buys the property, subject to the bank's approval. Depending on the type of loan you have, when you sell the property to your friend, you may be released from all or some portion of the liability anyway. However, if your friend has poor credit, the bank may not approve him, and he won't be able to assume the loan.

If I misunderstood the facts, please feel free to let me know, and I can clarify my answer. Good luck!

Re: Assumable Mortgage: Overlooking Anything/ Time Frame?

I also do not think this is a good idea. First of all, you can have any writing you want with the buyer, but the bank has your name on the dotted line and don't care what sort of side agreement you have with a third party to sell the property. You will be responsible for the mortgage and your great credit will suffer if they don't make the payments; not a good situation for someone who's probably worked very hard to get their credit score up.

Secondly, assumable mortgages are very hard to come by. And there's no guarantee the bank would approve it. There are probably very good reasons why your buyer doesn't have good credit. Those reasons are the very same ones that should prevent you from doing this.

Re: Assumable Mortgage: Overlooking Anything/ Time Frame?

Very few mortgages are assumable--basically FHA and VA loans are about it. And there is virtually no way you are going to get an FHA or VA loan for non-residential property. YOU will be responsible for the loan until it is paid off, no matter what kind of document you and your buyer sign. Also, the lender will require you pay the full amount of the loan if they find out about your loan assumption or transfer of the property to your buyer. In short, don't do this.