All FHA, USDA, and VA mortgages are fully assumable by a buyer, which means the buyer can assume the existing rate and term of the seller’s mortgage. With rates having flown up, this creates enormous opportunity for the buyer to save tens of thousands of dollars in interest payments, costs, and years repaying the mortgage of the seller.
Benefits of an Assumption
- No new loan origination or funding fees
- Huge interest savings
- Potential years of payments saved
- No appraisal required
- Possible mortgage insurance savings
- No mortgage tax (in states that have one)
- For FHA buyers, no 1.75% upfront mortgage insurance premium charged
- Much faster process
- Qualify for a larger sale price with a lower monthly payment
- More buyers qualify when the payment is lower than a new mortgage
There are almost 10 million existing government insured mortgages in the United States, fully twenty percent of all properties currently listed for sale. Assumption not only benefits the buyer, but it benefits the seller as well. Upon assumption, the seller is forever released from any liability (novation) on the mortgage, enabling them to obtain another mortgage without issue. In addition, the seller benefits from an assumption because the lower payment that their mortgage requires means not only are there more people who qualify, but results in a higher price and demand for the seller’s property because of the financing their assumable mortgage offers.
For example, let’s say the seller has a 3% mortgage that is three years old, for a loan amount of $300,000. This loan would have a principal and interest payment of $1265. A new loan at the current rate of 6% would distill a payment of $1800 a month, a $535 a month savings for the life of the loan. This is an over $192,000 savings of interest alone over the course of the loan. In addition, the loan would be paid off two years sooner than would a loan that the buyer obtained and didn’t assume. And as rates go up, the savings increase dramatically.
FHAPROS is the industry leader in mortgage assumptions in the United States. We help all industry stakeholders, whether it is real estate agents, sellers, lenders, or servicers who wish for their clients to receive the benefits of assumption. We assist the buyer who must qualify with sufficient credit and income, with the process of assumption and work with the seller’s servicer to ensure compliance with assumption rules and complete the paperwork that is necessary to fully assume the seller’s mortgage and make it become the buyers.
The assumption process is much less painful for the buyer than for them to apply for their own loan, since the loan they are assuming has already been funded, insured, and sold as a mortgage backed security.
If you are interested in our FHA, VA, or USDA mortgage assumption service, you may contact us below and a representative will contact you immediately regarding your needs.
Frequently Asked Questions
Which loans can be assumed?
Why aren’t conventional loans assumable?
If I allow the buyer to assume my mortgage, do I have to worry they will make late payments and harm my credit?
If I assume a government mortgage, can I offer it to the buyer when I sell my mortgage to assume?
Are there any reasons not to assume someone’s mortgage?
Does it take a long time to assume a mortgage rather than obtain one on my own?
Does the lower payment that an assumption offers result in more people qualifying for the property that has an assumable mortgage?
How many assumable mortgages are there in the marketplace?
What is the market capitalization of assumable mortgages?
Is an FHA reverse mortgage assumable?
Can the seller “carry back” a second mortgage on the property when I assume their mortgage?
Do I still have to have title insurance and a closing agent to complete an assumption?
If I assume the seller’s mortgage, is the loan still for 30 years?
Is an appraisal required of an assumption?
What are the savings of an assumption?
Do I have to pay PMI on an assumption?
Can an investor assume government mortgage?
Can I customize my home search to include properties with assumable mortgages?
What if the assumable mortgage is less than the purchase price?
Is there an up front mortgage insurance premium (UFMIP) on the assumption of a government loan?
Are credit qualifications harder on an FHA loan?
Can a non-veteran assume a VA mortgage?