Which of these three rules can actually blow up your deal — and which one doesn't apply here?

Three rules keep resurfacing across this course, each one attached to a different lesson because each one bites at a different moment: Dodd-Frank/SAFE when you write the note, due-on-sale if the existing loan stays in place, and the applicable federal rate (AFR) if the rate you charge is unusually low. Scattered across lessons, it's easy to remember that each one exists and still misjudge which one actually applies to the deal sitting in front of you. This page puts all three in one place, with the half nobody usually mentions: what each rule does not reach.

Dodd-Frank/SAFE: narrower than it sounds

The trigger is owner-occupancy plus volume, not the existence of seller financing itself. A landlord selling a rental to another investor who will never live there is financing an investment sale, not a residential mortgage in the SAFE Act sense — the exemption most individual sellers rely on assumes exactly that combination: a person, not a business entity, selling one or a small handful of properties in a 12-month window, to a buyer who will occupy the home. Move any one of those three facts — the seller is an LLC, the buyer is renting the house out, or the seller has financed four sales this year — and the analysis has to be redone from scratch rather than assumed to still hold.

Due-on-sale: the transfers Congress carved out on purpose

Federal law doesn't just leave due-on-sale as an unqualified lender right — the Garn-St Germain Act lists specific transfers a lender cannot accelerate over, regardless of what the mortgage says. A transfer to a relative on the borrower's death, a transfer to a spouse or child, a transfer ordered by a divorce or legal-separation decree, and a transfer into a living trust where the original borrower stays a beneficiary and keeps living in the home are all protected. Notice what's missing from that list: a sale to an unrelated buyer, on purpose, is not on it. The exact transfer this course teaches — a subject-to or wrap sale to an investor — is precisely the kind Garn-St Germain does not shield, which is the whole reason due-on-sale is a live risk in Module 2 and not a settled non-issue.

AFR: a floor, with a narrow gap under it

The Applicable Federal Rate sets the minimum rate the IRS treats as real interest on a private note; below it, the agency can impute the difference as income to the lender and, in family transactions, a gift to the borrower. The gap under that floor is narrow and easy to misjudge: there is a limited exception for small loans between individuals, but it comes with conditions — a cap on the borrower's net investment income, among others — that a note over roughly the size in this course's reference deal will not meet. Treat the exception as something to have a CPA confirm applies, not something to assume covers a note of any meaningful size.

• Dodd-Frank/SAFE turns on who is selling, to whom, and how often — not on the interest rate or the down payment.
• Due-on-sale has named federal exceptions, and a sale to an investor buyer is not one of them.
• AFR's exception for small loans is narrow and conditional — check it, don't assume it.
• None of the three rules disappears because a deal is small, informal, or between people who trust each other.