Financing Addenda Spotlight
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Financing Addenda SPOTLIGHT
Agenda
Third-Party Financing Addendum
• The Purpose
• Key Objectives
• Form Overview
Loan Assumption Addendum
• The Purpose
• Key Objectives
• Form Overview
Seller Financing Addendum
• The Purpose
• Key Objectives
• Form Overview
Third - Party Financing Addendum
The Purpose
The purpose of the Third -Party Financing Addendum is to outline the terms and conditions under which a buyer will obtain financing from a third -party lender to purchase a property.
KEY OBJECTIVES
Define Financing Terms:
The addendum outlines the desired financing details, including loan type, loan amount, and interest rate.
KEY OBJECTIVES
Protect the Buyer:
If the buyer can't get financing as outlined, they can terminate the contract and get their earnest money back.
KEY OBJECTIVES
Set Deadlines:
It sets deadlines for the buyer to secure financing approval.
KEY OBJECTIVES
Defines Financing Approval:
Establishes the difference between buyer approval and property approval.
ASK THE LENDER
ASK THE LENDER
HARD MONEY or LINE OF CREDIT
2 TYPES OF APPROVAL
APPRAISAL REQUIREMENTS FOR FHA & VA
PURCHASE PRICE
PROTECTS THE LENDER
The Purpose
The purpose of the Loan Assumption Addendum is to outline the terms and conditions under which a buyer can assume the seller's existing mortgage. This addendum clarifies the financial and procedural aspects of the loan assumption process.
KEY OBJECTIVES
Provides Details of Existing Loan: It specifies the existing loan details, including the loan balance, interest rate, and remaining term.
KEY OBJECTIVES
Assumption Approval:
It establishes that the loan assumption is contingent upon the lender's approval. This includes verifying the buyer's creditworthiness and ability to meet the lender's requirements.
KEY OBJECTIVES
Timeline:
It sets a timeline for the loan assumption process, including deadlines for submitting applications and receiving approvals.
KEY OBJECTIVES
Transfer of Liability:
It clarifies the transfer of liability from the seller to the buyer, ensuring that the buyer understands they will be taking over the existing loan and its obligations.
BUYER MUST BE APPROVED BY LENDER
WHAT THE BUYER IS ASSUMING
PROTECTION FOR THE BUYER
Listing Agent PRO TIP
Confirm Loan Assumption Eligibility!
• Contact Lender:
The seller should contact their mortgage company to confirm the loan is assumable. Not all loans are assumable; typically, FHA, VA, and USDA loans are, while most conventional loans are not.
• Review Loan Documents:
The seller should review the original loan documents to verify any assumptions terms and conditions.
Listing Agent PRO TIP
The Purpose:
• The original borrower should be released from future liability on the loan to protect their credit.
• When a VA loan is assumed by a new borrower, the original borrower can request the restoration of their VA entitlement. This allows the veteran to use their VA benefits again for a new VA loan in the future, instead of being tied up in the assumed loan and limiting their ability to use VA-backed financing for other properties.
The Purpose
The purpose of the Seller Financing Addendum is to outline the terms and conditions for the seller to finance a portion of the sales price for the buyer.
It’s utilized when the seller serves as the lender, enabling the buyer to make payments directly to the seller over time instead of obtaining a conventional mortgage from a third -party lender.
KEY OBJECTIVES
Establish Payment Terms:
Specifies the down payment amount, interest rate, payment schedule, and any balloon payments if applicable. This ensures both parties agree on how the loan will be repaid.
KEY OBJECTIVES
Define Default Conditions:
Outlines what constitutes a default, such as missed payments or failure to maintain insurance, and the remedies available to the seller in the event of a default.
KEY OBJECTIVES
Create Loan Security:
Establishes that the property being purchased will serve as collateral for the loan, protecting the seller's interest.
KEY OBJECTIVES
Confirms Responsibilities:
Defines the responsibilities of both the buyer and seller regarding property taxes, insurance, and maintenance obligations.
BUYER MUST BE APPROVED
DETAILS FOR THE NOTE
DETAILS FOR DEED OF TRUST
