Reo Foreclosure

Can we assume an existing loan when purchasing a pre foreclosure property and should we?

We have looked at auction sales, REO and HUD as possible sources of a well priced home in Fort Lauderdale, Florida. Now we want to feel we are covering the range if we look at pre foreclosure property as well. If we can identify real savings to be made, is there any impediment to assuming an existing loan as part of our offer?

The lender must agree to the assumption for the seller to quit liability. An assumable mortgage has a contract that allows, or does not specifically prohibit, a creditworthy buyer from assuming the existing loan.
You have to weigh up the value of this loan to you. If there is an interest rate better than what you can get elsewhere then it could be a good deal as you will avoid closing costs. The balance owing and the period to run, as well as the length of time you expect to need the loan will all have bearing on the worth of the assumption to you. Your expected savings could be wiped out if you have to take a second mortgage to supplement the assumed one, eg in the case where the assumed loan has already been paid down substantially and the value of the property has appreciated since the loan was taken out. Except I would wonder in that case why the preforeclosure! Another point, where there are substantial savings to be made you can bet the seller will want to share them, usually in the form of a higher price.
As one of the other correspondents says, in recent years a “due on sale” clause means the lender could insist on repayment, but I know some who haven’t although the interest rates were then raised to CMV. Where the assumption is allowed, the new borrower must meet all the same qualification requirements of the lender.

Research Pays off First Try at REDC REO Foreclosure Auction