Quit Claim vs Assumption

Guest 0.10 Dollars($)

I am the sole person on the mortgages of two houses. My parents live in one, and my sister and brother-in-law live in the other. If my responsibility for the debt would still exist after execution of a QCD or assumption, does this still mean that the debt counts toward my debt-to-income ratio? In other words, if either were executed, would I have more buying power were I to purchase another home for myself? And which of these two is the best option?

Thanks.

livinginnky · Posted: Thu Nov 15, 2007 11:23 am Post subject:

It would change nothing as far as your debt to income ratio goes.

Now if you could prove that they have been paying you. With cancelled checks or bank statements. Your going to need 1-3 years worth. You could use up to 75% of that money as income and it would count that way in your debt ratio.

michelle · Posted: Thu Nov 15, 2007 8:10 pm Post subject:

Knuckles,

Eric is correct about using the rental payments to offset part of the debt.

If one of the parties were to assume either loan then, yes, you would no longer be responsible for that debt and your DTI should be lower. Title to the property would transfer to the person assuming you loan.

You should contact your lender to be sure that the loans you have are assumable. The assuming party would then need to qualify for the mortgage.

jenkin7 · Joined: 04 Jun 2007 Posts: 939 140.80 Dollars($)

Hello Knuckles,

First of all, a quit claim transfers ownership but not the financial responsibilities. A quit claim will not transfer the mortgage from your name to someone else.

If the loan is refinanced by that person in his name only and your name is removed from that, then you are released from the financial obligations. Once you get the discharge certificate from your lender, this no longer remains your debt and your debt-to-income is lowered too.

You may also do a novation to transfer the mortgage.

If the loan is assumable, then one may assume it from you, releasing you from the debt. You have to talk to your lender to know if this is possible.

Guest 0.10 Dollars($)

"You may also do a novation to transfer the mortgage."

What is novation?

larry · Joined: 27 Jun 2007 Posts: 3328 473.51 Dollars($)

Hi Joe,

Welcome to this forum.

Novation is a kind of process that helps to transfer the liabilities of a mortgage from the original borrower to a new borrower. For the novation, the lender's approval is very much needed. So it is helpful to transfer the mortgage with the consent of the lender as Jenkin has rightly mentioned above.

Feel free to ask if you have anymore questions.

Thanks,
Larry

All times are GMT - 7 Hours

Page 1 of 1