The majority of 1031 tax deferred exchanges are forward meaning that the old property is closed on before the new property is purchased. However, sometimes it makes sense to initiate a reverse exchange when the new property is acquired first and the old or relinquished property is sold later. Successful completion of a reverse exchange requires the participation of an Exchange Accommodator Titleholder (EAT) that takes title to either the new or the old property because the Internal Revenue Service does not allow the taxpayer to own both properties at the same time. What happens if a mortgage is required for the new property? What should a lender know before a loan approval process? The answer to that question depends on the type of a 1031 reverse exchange that was initiated.
Recently I spoke with a mortgage office about 1031 exchange basics and the circumstances where they would typically see one. Here's a quick read for those new and old to the mortgage industry.
The Lender requires only the wife's husband on the replacement property loan because the wife owns too many investment properties. The wife wants to defer the capital gains on the sale through a 1031 exchange. Does this impact a 1031 exchange, if so how?