Can a Person Pay the Debt Owed on a House & Assume Ownership?

Owning a property involves paying bills, including a mortgage, property taxes and utility bills. If someone does not pay these obligations, the creditor might attempt to collect their money in other ways, such as taking a lien against the property and eventually taking ownership. It can then transfer the property to someone who pays the debt. This can also be done voluntarily when an owner chooses to transfer the title of property in exchange for payment of the debt.

Assumable Loans

Assuming a mortgage means a new borrower takes over responsibility for the loan and makes the payments. Most mortgage loans have a due-on-sale clause, requiring payment of the mortgage in full if the property is sold. For mortgage loans that can be assumed, you usually have to qualify with the lender to do so. There are exceptions on certain older VA and FHA loans, however. The last assumable VA loans not requiring qualification were made before 1988. The upside to assuming loans is that you might get one with favorable terms, such as a low interest rate.

Short Sale

A short sale is a way to assume ownership of a home by paying off an amount the bank will accept as satisfaction of the debt. You negotiate a short sale with the lender of the home, which agrees to accept less than the loan balance as full payment to avoid foreclosing on the property. The homeowner has no equity in these cases, and usually collects nothing at the time of the sale, although some lenders may pay a small amount to assist the homeowner in relocating.

Tax Liens

In 29 states plus the District of Columbia, delinquent property taxes result in tax liens on homes that are then sold at auction to the highest bidder. If you purchase one of these liens, and the homeowner does not pay the taxes due through the redemption period, you can take ownership of the home. You will need to pay off any other debts against the property to receive clean title.

Foreclosure Auction

Many foreclosed homes end up being auctioned to the highest bidder. If you meed the requirements to bid, such as putting down a required cash deposit, you can participate in these auctions. The lender accepts the selling auction price as full payment of the debt.