Say a seller has a remaining mortgage balance of $100,000 with an interest rate of 5 percent on a home worth $200,000. In other words, the lender would benefit before the seller is able to recoup any losses. So if the buyer can’t or doesn’t make payments, the lender - not the seller - would be repaid first from the proceeds of a foreclosure sale. Wraparound mortgages are in a junior or second lien position on the property. Once the title is transferred, the buyer is considered the owner of the property. Once terms are in place, the seller might either transfer the home’s title to the buyer right away or transfer the title once the loan is repaid. The buyer and seller also have to agree to the wraparound mortgage, and the seller needs to obtain permission from the lender before moving forward with the loan. Conventional loans aren’t typically assumable, but FHA, USDA and VA loans are. Only assumable loans can become part of a wraparound mortgage. While we strive to provide a wide range offers, Bankrate does not include information about every financial or credit product or service. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range can also impact how and where products appear on this site.
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