Wells Fargo Subordination Agreement: Everything You Need to Know

When it comes to financing your home, there are a variety of different factors you`ll need to consider. One of the most important is subordination agreements.

In the case of Wells Fargo, a subordination agreement is a legal document that allows the lender to maintain its lien position in the event that a borrower is refinancing a first mortgage or obtaining a new second mortgage. This agreement is necessary to ensure that all parties involved are protected while also allowing the borrower to access additional funds.

Here`s what you need to know about Wells Fargo subordination agreements and how they work:

What Is a Subordination Agreement?

In the context of home financing, a subordination agreement is a legal document that determines the priority of different liens on a piece of property. This is important because if a borrower defaults on their mortgage or sells their home, the proceeds need to be distributed in a certain order.

The first lien on a property is typically held by the primary mortgage lender, who has the right to foreclose on the home if the borrower defaults. However, if the borrower decides to take out a second mortgage or refinance their first mortgage, a new lender will need to establish a lien on the property.

A subordination agreement is a way for the new lender to « subordinate » their lien to the first lender`s lien, creating a clear hierarchy of liens on the property. This helps protect all parties involved by ensuring that they are repaid in the correct order if something goes wrong.

Wells Fargo Subordination Agreements

Wells Fargo is one of the largest mortgage lenders in the United States, and they offer subordination agreements to customers who are refinancing their first mortgage or taking out a new second mortgage.

If you`re considering a subordination agreement with Wells Fargo, there are a few things you`ll need to keep in mind:

– Wells Fargo will only subordinate to a new second mortgage if the borrower is using the funds for home improvements or debt consolidation. They will not subordinate to a cash-out refinance or a second mortgage for any other purpose.

– The borrower must have a good credit score and a debt-to-income ratio of less than 45% to qualify for a subordination agreement with Wells Fargo.

– The subordination agreement will typically require an appraisal of the property to determine its current value.

– Wells Fargo may charge a fee for the subordination agreement, which can range from a few hundred dollars to over a thousand dollars.

Benefits of Subordination Agreements

There are several benefits to obtaining a subordination agreement, including:

– Access to additional funds: If you`re looking to make home improvements or consolidate debt, a subordination agreement can allow you to access the equity in your home without having to pay off your first mortgage.

– Lower interest rates: Because a second mortgage or home equity loan is typically considered a higher risk loan than a first mortgage, the interest rates are often higher. By obtaining a subordination agreement, you may be able to obtain a lower interest rate for your second mortgage.

– Protection for all parties: By establishing a clear hierarchy of liens on your property, a subordination agreement can help protect all parties involved in the event of default or foreclosure.

Conclusion

If you`re considering taking out a second mortgage or refinancing your first mortgage, a subordination agreement is an important legal document that can help protect all parties involved. By working with a lender like Wells Fargo, you can access additional funds and secure a lower interest rate while also ensuring that your financial obligations are clear and manageable.