Looking to buy a home?

Assumable mortgages offer a fantastic opportunity to save thousands on your mortgage, especially in today’s high-interest rate environment. Understanding loan assumptions can set you apart from the competition and allow you to take advantage of this unique opportunity.

What is an Assumable Mortgage?

An assumable mortgage allows the buyer to purchase a home by taking over the seller’s existing loan.

All VA, FHA, and USDA loans are assumable, and anyone can assume these loan types. For VA assumptions, the buyer is not required to have VA eligibility.

Example Savings

Consider an $800,000 home with a 20% down payment:

• A new loan at 7% interest would have a monthly payment of about $4,258 (principal and interest).
• Assuming a loan at 75% interest would have a monthly payment of only $2,612. That’s over $1,600 per month in savings — nearly $20,000 per year!

In the current rising rate environment, it would be very costly, if not impossible, for a buyer to obtain a rate several points below market by buying down the rate on a new loan.

Lower Closing Costs

Closing costs are reduced when assuming an existing loan compared to taking out a new one. First, there is no requirement for an appraisal with a loan assumption. Second, the buyer benefits from not needing to purchase a new lender’s title insurance policy because the existing policy remains in place. Combined, these two items can save buyers a few thousand dollars in closing costs alone!

Who Can Assume a VA Loan?

There are no eligibility requirements for FHA assumptions, and anyone can assume a VA loan, even if they are not a veteran! While there are military service requirements to originate a new VA loan, almost any buyer can take over an existing VA loan if they meet the lender’s financial qualifications, such as:

• Sufficient income
• Good debt-to-income ratio
• Decent credit score
• Required down payment funds (which could be substantial if the seller has significant equity)

How to Find Homes with Assumable Mortgages 

Until recently, it was exceedingly challenging to find homes for sale with assumable mortgages. Only about 10% of homes with assumable mortgages are advertised as such by listing agents, making it extremely difficult to use keywords to find those homes online.

Fortunately, if you are a prospective homebuyer in the National Capital Region, there is a purpose-built search platform to help — AssumeList. Veteran-owned, AssumeList enables users to search through every home listed for sale with a VA, FHA, and USDA assumable mortgage. Users can view interest rates and loan balances, and filter listings based on the down payment requirement (aka cash gap). Licensed agents who use AssumeList can even search all off-market homes with assumable loans. 100% of AssumeList homes contain an interest rate below 5%; the vast majority have rates of 3% and lower.

Not only can AssumeList help you find a home, if you work with one of their expert agents you’ll receive white-glove service throughout the entire assumption process at NO additional cost! From finding a home, to negotiating the contract, through working with the seller’s lender for prompt approval… AssumeList will get the job done!

The Bottom Line

As interest rates continue to rise, loan assumptions are primed to become increasingly popular. By educating yourself about this powerful financing option, you stand to benefit and save thousands on your next home purchase.

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