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While home buyers might hope that they will qualify for a mortgage from the usual financial institutions, like a bank, they may find that their spotty credit score is an obstacle that prevents them from qualifying. What then? One Plan B may be to get what’s known as a wraparound loan.

A wraparound loan is where a home buyer takes out a loan from the home sellers, who then “wrap” this new loan around the mortgage they already owe on a home. The sellers continue paying the original mortgage, while the buyers pay off their own wraparound loan to the sellers, which the sellers might use to help pay off their original loan, or else just pocket the money.