Assumable Mortgages – What They Are

An assumable mortgage allows a homebuyer to take over the seller’s existing mortgage, keeping the same interest rate, terms, and balance. This can be especially advantageous in a rising interest rate environment, as the buyer can “assume” a loan with a lower rate than what’s currently available.

Types of loans that are assumable include FHA (Federal Housing Administration), VA (Veterans Affairs), and USDA (United States Department of Agriculture) loans. Conventional loans typically are not assumable unless explicitly stated.

To find assumable mortgages, buyers can start by asking sellers directly if their mortgage is assumable. Additionally, real estate agents often have knowledge of such properties, and buyers can also search for FHA, VA, or USDA-financed homes.

Key characteristics of assumable mortgages include the need for the buyer to qualify for the existing loan under the lender’s criteria, just as they would for a new mortgage. The buyer may need to provide a down payment to cover the difference between the home’s purchase price and the mortgage balance. In VA loans, the buyer doesn’t have to be a veteran to assume the mortgage, but the original borrower’s entitlement may remain tied up in the loan until it’s paid off.

Assumable mortgages offer a unique opportunity for buyers, but it’s essential to thoroughly understand the process and requirements.