Can Borrowers Be On The Loan and Not On Title? Problem With Last Minute Seller Credits “Title Only” Buyers

    We often have “title only” buyers, or buyers who want to be on the property’s title but who do not want to be on the loan.

    This is often the case with spouses, where one spouse might have credit issues that adversely impact financing terms.

    The spouse with good credit will be the only one on the loan (assuming she has enough income to qualify on her own) but both spouses will be on title.

    “Loan Only” Buyers

    Something we don’t see nearly as often though is “loan only” buyers. These are buyers who want to be on the loan but do not want to be on title for some reason.

    I used to wrongly believe that all lenders prohibited this because of prohibitions at some mortgage banks and wholesale lenders with whom we formerly worked (and I unfortunately stated my incorrect belief in several blogs).

    So – this blog is my correction. Buyers can indeed be on the loan but NOT on title.

    I should add though that this applies to conventional (conforming and jumbo) loans only; FHA and VA loans (and some jumbo) loans require all borrowers on the loan to also be on title.

    And finally, “loan only” borrowers need to remember though that they are still on the hook for the performance of that loan, whether they are on title or not, until it is paid off or refinanced out of their name.

    Problem With Last Minute Seller Credits

    All lenders, not just JVM, push to get a “clear to close” designation from their underwriters as quickly as possible – to impress clients, to close as quickly as possible, and to allow for enough time for borrowers to comfortably review and sign documents.

    “Clear to close” simply means that all major “loan conditions” have been formally signed off and that loan documents can be drawn and signed (with funding set to take place soon after).

    All too often though, we will get last minute seller credits or changes in purchase terms after we get our “clear to close.”

    I should add that we understand why this happens, as agents and homebuyers use inspection reports and other issues as negotiating tools; agents rightly garner seller credits for closing costs in lieu of getting direct credits for repairs, as they well know that “credits for repairs” could foster all kinds of other deal-delaying or even deal-killing issues.

    But, this is just my friendly reminder that getting additional seller credits after a lender gets their clear to close can foster delays.

    This is because changes in seller credits (either increases or decreases) require lenders to go back to the underwriter to re-run the automated underwriting software and to sign off on the change.

    This process, while relatively easy, can often take a day or two, depending on how busy the underwriter is at the time (files typically get put into a “queue” and have to wait their turn to get reviewed).

    If loan documents have already been drawn or signed, there can be additional delays waiting for the new documents or amended documents and new signatures – if necessary.

    Jay Voorhees
    Founder/Broker | JVM Lending
    (855) 855-4491 | DRE# 1197176, NMLS# 310167

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