What must a buyer do if the seller's mortgage contains a due-on-sale clause?

When a seller's mortgage has a due-on-sale clause, it means that the lender has the right to require the full loan balance to be paid immediately if the property is sold or transferred. This clause is included to protect the lender's interests, ensuring that they can review the creditworthiness of any new borrower. Thus, if a buyer is interested in purchasing the property, they must first obtain the lender's permission to assume the loan. This involves the buyer negotiating with the lender to see if they qualify to take over the existing loan under the terms of the due-on-sale clause.

This process can sometimes lead to the buyer needing to provide information about their financial situation to the lender to secure approval. In contrast, taking over the seller's mortgage in a subject-to transaction (as suggested in one of the incorrect options) would not involve formal lender approval, which could lead to complications if the due-on-sale clause is not adequately addressed.