On Title But Not on Note Mortgage Guidelines

This guide covers qualifying for a mortgage after foreclosure for borrowers on title but not on note. Home buyers with a prior foreclosure who were on the title but not on note of a home currently being foreclosed on can qualify for a new mortgage loan. The waiting period requirement does not apply. Therefore, if a husband and wife were both on title but one of the borrowers was not on the note, the waiting period requirements after foreclosure will not apply to the person, not on the mortgage note.

There is no waiting period requirement for a person who was on title to a home but not on the mortgage and the home foreclosed. 

This scenario is very common where a husband and wife live in a home currently under foreclosure, and only one is on title but not on note.  Most lenders will consider this type of scenario a bailout. However, some lenders will approve borrowers on title but not on note. Even though homeowners currently live in a house being foreclosed on, they can qualify as long as they are on title but not on note. The waiting period after foreclosure, deed-in-lieu of foreclosure, or short sale guidelines do not apply to those on title but not on the note. In the following paragraphs, we will cover the mortgage guidelines for borrowers on title but not on note.

What Does It Mean on Title But Not on Note

I recently did a deal where the husband and wife were both on title but on note several years ago. However, they got the home refinanced four years ago, and the wife was just on the note, but both the husband and wife were on the title. Then, the Great Recession of 2008 hit this country. They both lost their jobs. They both had to file for bankruptcy. The home was not included in the Chapter 7 bankruptcy. The bankruptcy waiting period guidelines to qualify for a mortgage apply to both borrowers. However, the foreclosure waiting period guidelines do not apply to the borrower who was on title but not on note.

Waiting Period Guidelines on Mortgage Included in Bankruptcy 

If a husband and wife reaffirm the mortgage after Chapter 7 bankruptcy, it means the mortgage is not included in the bankruptcy. After the bankruptcy, they fell behind on their mortgage. Eventually, they could not afford their monthly mortgage payments, and the home was foreclosed.

Since the wife was the only borrower on the note, the waiting period on the foreclosure would not apply for the husband, and the husband can qualify for a mortgage with just the bankruptcy waiting period.

They both waited for the 2-year waiting period after the bankruptcy discharge date. They have rebuilt and re-established their credit after bankruptcy discharge and are ready to purchase another home since their current home was in foreclosure. Fortunately, the husband was on title but not on note. He qualified for a new FHA loan. This holds true even though he was living in a home that was being foreclosed upon.

What is a Note on a Mortgage Loan

A mortgage note, also known as a promissory note or a loan note, is a legal document that outlines the terms and conditions of a mortgage loan. It is a binding agreement between a borrower (often referred to as the “maker” of the note) and a lender (usually a financial institution or a mortgage company). The mortgage note contains important information about the loan, including:

Borrower’s Information

The note identifies the borrower’s name, address, and contact information.

Lender’s Information

It also identifies the lender, including their name and contact information.

Loan Amount

The principal amount of the loan is the initial amount borrowed.

Interest Rate

The interest rate that will be applied to the loan determines the cost of borrowing.

Repayment Terms

The note specifies the terms of repayment, including the monthly payment amount, the due date, and the duration of the loan (e.g., 15 years, 30 years).

Payment Schedule

It outlines the schedule of payments, including the number of payments and the amount to be paid each month.

Late Payment and Default Terms

The consequences of late payments and what constitutes a default on the loan are detailed in the note. This may include penalties, fees, and the lender’s rights in case of default.

Prepayment

The note may include whether the borrower can make extra payments or pay off the loan early without penalties.

Collateral

The mortgage note often specifies the property used as collateral for the loan. If the borrower fails to repay the loan, the lender may have the right to foreclose on the property.

Signatures

The borrower and the lender must sign the mortgage note to bind it legally. It’s important for borrowers to carefully review and understand the terms and conditions outlined in the mortgage note before signing it. This document is evidence of the loan agreement and can have significant legal and financial implications. If you have questions or concerns about a mortgage note, it’s advisable to seek legal advice or consult with a financial advisor to ensure you fully understand your obligations and rights as a borrower.

Lender Overlays on Borrowers on Title But Not on Note

In the above scenario, my client went to multiple lenders to qualify and get pre-approved for a mortgage. He got different, conflicting answers. They told them they had overlays concerning him being on title but not on note, so they could not do the mortgage loan. Most lenders consider this type of scenario a mortgage bail. My client found me via internet research and asked whether I could do the deal. It was a no-brainer because I have done many cases like these before. I can do deals like these because I have relationships with wholesale lenders with zero lender overlays. If we get a DU automated approval by Fannie Mae or LP AUS, I can process, underwrite, and close the loan.

Fannie Mae and Freddie Mac Guidelines on Title But Not on Note

Being on title but not on note is perfectly legal and within agency mortgage guidelines. However, many lenders consider this a bailout and will not do the mortgage loan. Many lenders will deal with this scenario as if it were a bailout. You also need to consider that many lenders will require rental verification.

If you are in a similar situation, ready to purchase a home, and need a mortgage loan, we can help.  Gustan Cho Associates is a national mortgage company licensed in multiple states with no lender overlays on government or conventional loans.

Living in a house being foreclosed on means living rent-free. Getting a rental verification is not possible, so you must choose a lender that does not require a rental verification.  Please contact us at Gustan Cho Associates at 800-900-8569 or text us for a faster response. Or email us at gcho@gustancho.com. Or contact us at Gustan Cho Associates.

Can Someone Be on Title But Not on Note and Qualify For a Mortgage After Foreclosure

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