Are You Eligible for an Assumable Mortgage?

Taking on the responsibility of an assumable mortgage can be a great way to lower your monthly mortgage payments. But before you jump in, here's what you need to know about this popular option.


Introduction

Most mortgages can be assumed, but there are some important things to consider before taking on the responsibility of an assumable mortgage. If you're considering an assumable mortgage, here's how to determine if it's right for you.

Here's how to see if an assumable mortgage is right for you.

If you're wondering whether your mortgage is assumable, it's a good idea to ask your lender. Your lender may also be able to tell you if there are any restrictions on transferring the loan or what would happen if the loan wasn't transferable.

If they can't answer these questions, we'd recommend contacting a local real estate lawyer who has experience with homeowner's association laws and mortgages in general.

What Is an Assumable Mortgage?

An assumable mortgage is a home loan that may be transferred to the next buyer. The original borrower is released from the loan, and the new buyer assumes the mortgage.

The advantage of an assumable mortgage is that it allows you to sell your home without having to pay off your loan in full. If you have good credit, you will be able to find buyers who want to continue making payments on the house after they buy it. This can save them money on their monthly payments and allow them to avoid refinancing charges or paying fees for taking over someone else's existing mortgage agreement.

Can All Mortgages Be Assumed?

It all depends on the type of mortgage you have, but most mortgages will be assumable. That said, it's important to check with the lender and real estate agent before assuming a mortgage. The following are some factors that may affect whether a mortgage can be assumed:

  • Assumption approval

  • Age requirements (for example, if you're under 18)

  • Down payment requirements (if there are any)

Some types of mortgages aren't assumable at all because they're non-conforming loans and don't meet certain criteria or limits set by Fannie Mae and Freddie Mac. To find out if yours is one of these exceptions, check with your lender or real estate agent before assuming your loan.

How Do You Assume a Mortgage?

Assume a mortgage is the process of taking over the payments for someone else's loan. You can do this if you're buying their home, or if they're moving in with you and splitting the monthly payments between you.

To get an assumable mortgage, first learn whether your lender allows it. Then gather your information: bank statements, W-2s, tax returns and other documents required by your lender. Apply online or go into a branch office to start the paperwork process to get approved for your new home purchase or sublease agreement.

While assumable mortgages are usually better for the buyer, they can be lucrative for the seller as well.

While assumable mortgages are usually better for the buyer, they can be lucrative for the seller as well. For example, many sellers would prefer to sell their homes using an assumable mortgage if it means that they get a better price for their home or can sell it faster than with a traditional mortgage.

In addition to being able to sell your house sooner and receive more money from the sale, an assumable loan is also potentially more profitable than a traditional loan because you don't have to pay closing costs on the sale.

Conclusion

Assumable mortgages can be a great way to get into a home that otherwise would be out of your price range. The only downside is that you’ll have less flexibility when it comes time to sell. If you think an assumable mortgage might work for you, then go ahead and apply!

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