Yes, a wraparound mortgage is legal in Texas. A wraparound is when a home is sold with an existing lien still on it. The buyer uses a wrap lender to take out a second, higher-interest loan that “wraps” around the existing one.

The original borrower for the loan is still responsible for the mortgage, we recommend using an escrow or loan servicing company to ensure payments coming directly from the new buyer are accounted for and paid correctly. If the new buyer fails to pay, the original owner is still responsible for that mortgage.

The new purchaser makes monthly payments to the seller, who is then responsible for making the payments to the underlying mortgage(s).

There are a number of different ways to negotiate a wraparound transaction. Here are some examples of terms to negotiate: You can negotiate the price of the property, the amount of the down payment, the term, the balloon, the interest rate, and the monthly payments.

No, there are no credit restrictions for a wraparound mortgage. You can sell to your sister and have no credit check at all. It is recommended to thoroughly check credit (We have a service we recommend) because they can default on the loan and you might have to foreclose. Please inquire for details. A non-traditional mortgage is especially helpful if you’re self-employed or have variable cash flows, where you can’t qualify for a traditional loan.