Realtor Tips: Mortgage Assumption

All VA loans are assumable and most FHA loans are too.  Most conventional loans are not.  When you assume a loan you are taking over with the same terms as what the original seller had. So, if their rate is 3.5% with 15 years left on the loan you step right into that.  Wow, that could be a big savings over what you could get with a new loan. 

There must be a negative side right? Let’s say they have the loan paid down to 150k and the sale price of the home is 250k. The seller may be willing to ‘give away’ their rate for you to assume but they won’t give away their equity. You would need to bring the difference, 100k in this example, to the closing table to assume this mortgage. That knocks a lot of would-be buyers out of the assumption game if there is a big difference in the price and outstanding loan balance. 

A big misconception is you must be a veteran to assume a VA loan. Not true.  Anyone can assume a VA loan. As a seller allowing an assumption, you’ll want to make sure your VA eligibility is restored so that you can use it on the next home if necessary. As a local Dayton, OH Realtor with Wright Patterson Air Force Base in my backyard I see lots of VA loans. An assumption can add value for your next buyer if the rate and terms are better than what is currently available.