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Commonly Asked Questions about Real Estate Mortgage Packages

Both parties will sign a promissory note that includes the terms of the mortgage. The seller keeps the existing mortgage on the home and either transfers the title to the buyer right away or once the loan is repaid. The buyer sends the seller their monthly payment, and the seller then pays the original lender.
Package mortgages are also known as all-inclusive mortgages or wraparound mortgages.
The buyer and seller agree to a down payment and loan amount, then sign a promissory note laying out the mortgages terms. After both parties finalize the transaction, the seller transfers the title and deed to the buyer. While the seller continues to make payments on the original mortgage, they no longer own the home.
Example of a Wrap-Around Loan Lets say Joyce has an outstanding mortgage worth $80,000 on her home with a fixed interest rate of 4%. She agrees to sell her home to Brian for $120,000, who puts 10% down and borrows the remainder, or $108,000, at a rate of 7%.
Conventional Mortgages Conventional mortgages are the most common type of mortgage. That said, conventional loans may have different requirements for a borrowers minimum credit score and debt-to-income (DTI) ratio than other loan options.
Wraparound mortgages dont require either to have a DTI of 43% or lower or whatever percentage their prospective lending institution requires. Buyers and investors can purchase property despite having bad credit. To secure a conventional mortgage, a buyer needs to have a credit score of 620 or greater.
A wraparound mortgage is a unique form of seller financing in which the seller keeps their mortgage and extends a loan to the buyer. The buyer pays the seller each month and the seller uses that money to pay their own mortgage. For this to be a legal option, the seller must have an assumable mortgage.