What is a Due on Sale Clause When Purchasing a Home in Omaha?

When purchasing a home in Omaha it is best to know as much information about the process as possible. Part of the home purchase process is making sure you know about mortgages and what they entail. Mortgages can include several different requirements and a lot of paperwork. Within that paperwork, there can be clauses and language that you may have never come across.

One of those clauses in mortgage paperwork is a due on-sale clause.

What is a due-on-sale clause?

A due on-sale clause is sometimes also referred to as an acceleration clause and it is a common portion of a mortgage agreement. It is commonly standard on conventional mortgage agreements that are backed by Fannie Mae and Freddie Mac. You will also find them included in the paperwork for jumbo mortgages.

This clause communicates that if the property being purchased with the mortgage money is sold or transferred in ownership the remaining principal balance on the mortgage is due immediately upon sale or transfer. This helps to protect the lender and ensures they receive payment for their loan after the property changes ownership. Without this clause, the mortgage borrower could sell the home and use all of the profit for something other than paying back the loan they took out to purchase the home.

This clause is also used as a measure of protection in the event of being underwater with a mortgage. If a home is currently worth less than the owner owes on their mortgage it states that the homeowner must provide extra cash to cover the outstanding balance on the mortgage loan for the home. If they are unable to do so they must communicate with the lender and ask the lender's permission for a short sale on the property.

Why it is Important to know about this clause?

It is common sense to the majority of us that you would pay off a mortgage loan upon the sale of a home. However, some people may feel that other things are more important to pay off before paying the mortgage loan on a property. And some homeowners may not realize that when you purchase a home with a mortgage there is a lien on your home through the mortgage lender until that mortgage is paid.

You want to ensure that you know what you are signing up for and what you are agreeing to when you sign your mortgage paperwork upon the purchase of a home in Omaha. As with any other loan, a lender is going to want payment in full when you no longer own the item that they loaned you money to purchase. You do not want to get into a sticky situation not being able to transfer ownership because there is a lien on your property. This gives the lender the right to stop the property sale to a new owner until they have received all of the monies they have lent out to you. It is incredibly important to know that you are the owner of your home but the mortgage lender does hold rights to the property as they have given you the money to purchase the home.

If you are considering purchasing a home in Omaha I can help. Contact me anytime to find a home that meets your search criteria and find a neighborhood in Omaha you will love. I am here to help you with any Omaha real estate needs both buying and selling homes.