In this guide, we\u2019ll walk you through the ins and outs of assumable mortgages, helping you make an informed decision that\u2019s right for you.<\/p>\n\n\n\n\n\n
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\n <\/div>\n \n Partner With a Top Agent Familiar With Assumable Mortgage Listings<\/h3>\n
HomeLight can connect you with a top-performing real estate agent who understands the ins and outs of assumable mortgage listings in your market.<\/p>\n \n
What is an assumable mortgage?<\/h2>\n
An assumable mortgage allows a buyer to purchase a home by taking over the seller\u2019s existing mortgage loan. One reason more buyers are seeking assumable mortgages is to take advantage of lower interest rate financing. Many home sellers entering the market today refinanced during the pandemic era of historic low interest rates.<\/p>\n
Thus, assuming a mortgage can be like inheriting a financial advantage. Rather than taking out a new loan at a high rate, the homebuyer can assume the interest rate, current principal balance, repayment period, and other terms of the seller\u2019s existing mortgage.<\/p>\n
However, not all mortgages are assumable, and there may be specific qualifications and fees associated with assuming a home loan. There are also new products and programs entering the market to help walk buyers and sellers through the assumption process<\/a>.<\/p>\n To determine if a mortgage loan is assumable, you need to consider the type of loan and its specific terms<\/a>. The most common loans that can be assumed are typically government-backed or government-insured loans. Here are some common types of mortgage loans and their assumability:<\/p>\n Federal Housing Administration (FHA<\/a>) loans are often assumable<\/a>. This means that a qualified buyer can take over the existing FHA loan, subject to lender approval. You will need to qualify for traditional FHA loan requirements, such as having a credit score of at least 580 and being able to make a minimum down payment of 3.5%<\/a>.<\/p>\n Similarly, loans guaranteed by the Department of Veterans Affairs (VA<\/a>) are typically assumable<\/a>. However, you\u2019ll need to meet certain eligibility criteria<\/a>, such as holding a credit score of 620 or higher, and the VA must approve the assumption. Surprisingly, you don\u2019t necessarily need to be a veteran or active military service member to assume a VA loan. As with other lending options, your creditworthiness as a borrower will play the biggest role. You will also be required to pay the standard 0.5% VA funding fee<\/a>.<\/p>\n United States Department of Agriculture (USDA<\/a>) loans may also be assumable<\/a>, but like VA loans, they come with specific conditions. In this case, you\u2019ll likely need approval from both your lender and the USDA, and still hold a credit score of 620 or higher. An assumed USDA loan is typically assigned a new interest rate and terms. However, in some circumstances, like the transfer of property within families, the loan can be assumed with the original rate and terms without the borrower meeting all the eligibility requirements.<\/p>\n Some jumbo mortgages<\/a> that are originated by larger banks and not sold to Fannie Mae and Freddie Mac can be assumed. These circumstances are uncommon, however, and it can be difficult to know which jumbo mortgages are assumable.<\/p>\n ARMs<\/a> are typically 30-year loans with a fixed rate for an initial period, such as five, seven, or ten years. According to Freddie Mac<\/a>, some lender agreements \u201cprovide that the ARM is assumable for the life of the loan.\u201d Other agreements \u201cprovide that the ARM is assumable only after the initial fixed-rate period has expired or until a specified event has occurred, and is thereafter not assumable.\u201d<\/p>\n Because of their variable nature, assuming an ARM loan is not common and may not always be advantageous for the buyer. In cases where a conventional ARM loan has been deferred or modified to help the borrower avoid default, the loan is likely no longer eligible to be assumed by a third party<\/a>.<\/p>\n The majority of conventional mortgages offered by private lenders \u2014 loans backed by Fannie Mae and Freddie Mac \u2014 are not automatically considered assumable. Some conventional loans can be assumable in cases involving special circumstances, such as after a death<\/a> or divorce<\/a>. To qualify, the homeowner\u2019s mortgage contract would need an \u201cassumption clause<\/a>\u201d noted in the mortgage contract.<\/p>\n An assumption clause allows the mortgage holder to transfer the loan to another party. But even with this provision, the mortgage lender typically needs to approve the transfer. The new borrower would still need to meet the loan\u2019s eligibility requirements.<\/p>\n","protected":false},"excerpt":{"rendered":" Learn how to find assumable mortgages, types of loans you can assume, and the pros and cons of assumable mortgages. Is it the right choice for you?<\/p>\n","protected":false},"author":298,"featured_media":38942,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"cybocfi_hide_featured_image":"","footnotes":""},"categories":[192,629,632],"tags":[833],"class_list":["post-38941","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-for-buyers","category-home-financing","category-mortgage-loans","tag-what-is-an-assumable-mortgage"],"acf":[],"yoast_head":"\nWhat types of mortgages are assumable?<\/h2>\n
1. FHA loans<\/h3>\n
2. VA loans<\/h3>\n
3. USDA loans<\/h3>\n
4. Some jumbo loans<\/h3>\n
5. Some adjustable-rate mortgages (ARMs)<\/h3>\n
Are conventional loans assumable?<\/h2>\n