Question

Seller Bob wants to sell his house as soon as possible. He has an existing low interest loan on the property. The note contains an 'alienation clause' which is triggered by a transfer of title. Under these circumstances which of the following is correct?

1) The lender may call the loan only if the buyer is an alien.
2) The buyer who assumes the loan will make the same payments the seller has been making.
3) The lender can refuse to allow an assumption.
4) The lender may NOT require that the buyer qualify to assume the loan.

Answer 1

The lender can refuse to allow an assumption.

Step-by-step explanation:

In this case, the correct statement is option 3) The lender can refuse to allow an assumption.

An alienation clause in a loan indicates that the lender has the right to refuse or restrict the transfer of the title to another party. This means that the lender can prevent the buyer from assuming the loan if they choose to do so.

However, it's important to note that the lender may have specific conditions or criteria for allowing an assumption, such as the buyer qualifying for the loan. So, option 4) The lender may NOT require that the buyer qualify to assume the loan is incorrect.