When buying a property, most people assume they can secure a mortgage to finance the purchase. However, if the property transfer is done via a quit claim deed, getting a loan may not be so simple.
A recent AskDale question highlights this issue:
I have been living in my home for 15 years and now have the opportunity to purchase it via a quit claim deed for $115,000. Can I get a mortgage in my name?"
Let’s break down why this may be a challenging situation—and what you should consider before moving forward.
What Is a Quit Claim Deed?
A quit claim deed is a way to transfer ownership of a property from one party to another. Unlike other property deeds, it does not guarantee that the seller has a clear title to the property, that there are no liens, debts, or claims attached to the home, or that the new owner will have full legal protection
Because of this, a quit claim deed is mostly used between family members, spouses, or trusted parties—not for traditional real estate purchases.
Why Lenders May Deny a Mortgage
Mortgage lenders require assurance that a property has a clean title before approving a loan since the home serves as collateral. A quit claim deed can create complications in this process because it lacks any warranty that the title is free of issues.
Lenders may hesitate to approve financing on a property transferred via quit claim deed due to concerns over undisclosed liens, ownership disputes, or other legal uncertainties. Without a thorough title search and proper title insurance, the risk of financial or legal complications increases, making mortgage approval unlikely.
What Should You Do Before Purchasing?
1️. Before making any decisions, speak with a licensed attorney specializing in real estate. They can:
✔ Review the property title for any red flags
✔ Check for existing liens or claims against the home
✔ Advise you on how to properly transfer ownership
2️. If possible, ask the seller to use a warranty deed instead. Unlike a quit claim deed, a warranty deed guarantees that the property title is free and clear, making it much easier to secure a mortgage.
3️. Getting a title search will help confirm that the property is free of any legal claims, while title insurance protects you in case any past issues arise.
Final Thoughts: Proceed with Caution
While a quit claim deed may seem like a quick and easy way to transfer property, it lacks the legal protections needed for mortgage approval. Before moving forward, be sure to consult a real estate attorney, request a title search, and understand the risks involved.
By taking these steps, you can protect yourself financially and legally before making such a big investment.
Have you ever used a quit claim deed? Let us know how it went in the comments!
