What does buying "subject to" a loan mean? It means that you, as the buyer, will take over the payments of an existing loan from the seller. However, you do not assume that loan nor the obligation to pay it.

Most modern home loans are not assumable. You can't take over a loan and assume the liability, which releases the seller. That was the case many years ago. Now, if you take over the payments, the seller is still liable for the loan.

What about the "due on sale" clause? This is where there is probably more flexibility than in the past. Almost all of the loans of today have a clause that allows the lender to accelerate the loan and demand payment in full if the homeowner transfers their ownership. In the past, when real estate was selling more quickly, lenders were more likely to exercise the "due on sale" clause. However, with so many foreclosures already on their books in many areas today, it is probable that this isn't something they want to do now. Mortgage lenders don't want to hold physical real estate.

With the lender possibly being less likely to accelerate the loan (demand payment in full), what's the benefit of a "subject to" sale for the seller and the buyer?

Buyer - You can negotiate a lower down payment if desired, as well as favorable loan terms. And you don't have to apply for financing. If the interest rate is very low, you may be able to rent the property out for a nice, positive cash flow.

Seller - The seller is in trouble, and they've likely been unable to sell the home using traditional means. They are heading toward foreclosure or a short sale. In either of those situations, they will NOT receive any cash from the loss of their home.

You are offering them a way to sell the home, pass the notes to you, and take some cash away from the deal. They will have concerns about their liability for the loan, so you may have to set up a payment system that allows them to monitor your prompt payments. You can also assure them that your investment, the down payment, is something you don't want to lose by going into default.