Clark Galvan
Assumable mortgages are hard to find, but they offer unique financial benefits for buyers and sellers. When you assume a mortgage, you take over the seller's loan and become responsible for the remaining payments, including the interest rate. Most conventional mortgages are not assumable, but FHA, VA, and USDA loans are assumable and anyone can assume these loans. To find assumable mortgages, you can use platforms such as Roam, AssumeList, or Assumable, which allow you to search for active assumable mortgage listings near you. These platforms can provide valuable information such as interest rates, monthly payments, and potential savings. Additionally, you can try searching public records or county records to identify assumable mortgages in your desired location.
How do I find assumable mortgages?
| Characteristics | Values |
|---|---|
| Platforms to find assumable mortgages | Roam, AssumeList, Assumable, Zillow |
| Requirements | Minimum credit score of 580, though most lenders prefer 620-640 |
| Benefits | Lower interest rates, fewer closing costs, savings for the buyer, marketing strategy for the seller |
| Drawbacks | Time-consuming, complicated, risky for the seller if the paperwork is not processed correctly |
| Other considerations | Only 23% of mortgages are assumable, assumable mortgages are hard to find |
What You'll Learn
Platforms to find assumable mortgages
There are several platforms that can help you find assumable mortgages. Here are some of the notable ones:
AssumeList:
This is a unique real estate tool that allows prospective homebuyers, investors, and agents to find homes for sale with assumable mortgages. AssumeList enables users to search for properties with VA, FHA, and USDA assumable mortgages, regardless of whether they are actively listed or off-market. All the homes on AssumeList have interest rates below 5%, with the majority featuring rates of 3% or lower.
Roam:
Roam is a licensed real estate broker that helps identify home listings with low-interest-rate assumable mortgages. The platform currently operates in select areas of Georgia, Colorado, Arizona, Texas, and Florida, and charges a fee of 1% of the property's sale price. Roam transactions typically close within 45 days, and they manage the entire assumption process to coordinate the details between the buyer, seller, and agent.
Assumable.io:
Assumable.io is a national assumable mortgage platform with over 26,000 active listings. The platform was started by a homeowner who wanted to help others identify and purchase homes with assumable mortgages. They charge a flat fee of $1,850 for assumable mortgage processing services.
Withroam.com:
Withroam.com is another platform that lists homes with assumable mortgages, primarily in Atlanta, Tampa, and a few cities in Texas. Their listings feature interest rates below 5.5%, ensuring lower rates compared to conventional loans.
Homes77.com:
Homes77.com provides a list of assumable mortgage properties, primarily focused on the WA state area. The listings include various features such as laminate flooring, updated bathrooms, and spacious living areas. The platform also provides information on the assumable VA loans associated with each property.
These platforms provide valuable resources for those seeking to find and purchase properties with assumable mortgages, offering a range of options across different regions.
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Benefits of assumable mortgages for sellers
An assumable mortgage is a home loan that can be transferred from the original borrower to the new homeowner. The interest rate, repayment period, and other terms of the loan remain the same. This type of mortgage can be advantageous for sellers in several ways.
Firstly, it can be a powerful marketing tool, especially in a high-interest-rate environment. Buyers may be more inclined to purchase a home with an assumable mortgage, as it offers them the opportunity to secure a lower interest rate than what is currently available on the market. This can result in more buyers being interested in the property and potentially willing to pay a higher price. The seller can also benefit from the savings that the buyer receives due to the lower interest rate. They can negotiate a higher selling price or request that the buyer pay the closing costs.
Secondly, assumable mortgages can simplify the selling process. The absence of an appraisal requirement saves time and money, as appraisal fees can cost hundreds of dollars. Additionally, there are limited closing costs associated with assumable mortgages, which further reduces the financial burden on the seller.
Lastly, in some cases, sellers may be released from future responsibility for mortgage payments if the lender approves the assumption and transfers full responsibility to the buyer. This can provide peace of mind and protect the seller from potential financial risks associated with the loan.
While assumable mortgages offer benefits to sellers, it is important to note that they are not as common as they once were, and certain requirements must be met for a mortgage to be assumable.
Requirements for buyers
When it comes to assuming an existing mortgage, buyers are limited to the original loan conditions set by the seller's lender. This means that the buyer's ability to search for a more competitive mortgage rate and repayment term is limited.
The buyer must meet the lender's requirements, such as having sufficient assets and being creditworthy. The buyer must also follow the standard FHA loan application process. FHA mortgages are more accessible for buyers with a lower credit score, as most lenders require a minimum score of 580 for FHA loan approval. Some lenders allow for a credit score as low as 500 if the borrower can make a 10% down payment. The buyer must also cover the seller's equity in the home through an all-cash down payment or by taking out a second mortgage.
For USDA loans, the buyer must meet the standard qualifications, such as meeting credit and income requirements, and receive approval from the USDA to transfer the title. The USDA requires that the house be in a USDA-approved area, the seller not be delinquent on payments, and the buyer meet certain income and credit limits.
For VA loans, the buyer must pay the VA funding fee, unless they qualify for an exemption. Anyone can assume a VA loan, even if they haven't served in the military.
In all cases, the original mortgage lender must approve the mortgage assumption before either party can sign off on the deal.
How to determine if a mortgage is assumable
Assumable mortgages are most common when the terms currently available to a buyer, such as high-interest rates, are less attractive than those previously given to the seller. However, assumable mortgages are hard to find and are generally only a fit for patient sellers with government-backed mortgages.
If you are looking for a home with an assumable mortgage, you can try searching for active assumable mortgage listings near you on platforms such as Roam and Assumable. These platforms allow you to search for homes with assumable mortgages by entering your preferred city, state, zip code, or school district. You can also set up listing notifications to be notified when new listings that match your criteria become available.
You can also try searching public records for houses that interest you to see if their mortgage is assumable. These are often searchable PDFs, although the ease of access may vary depending on your location. Additionally, you can try to pull county records for each listing to see the recorded mortgage type.
If you are looking to assume a specific type of loan, such as a VA or FHA loan, there may be specific requirements that you need to meet. For example, VA loans originated after 1988 require lender approval for assumption, while FHA loans typically require a minimum credit score of 580. It is important to note that not all mortgages are assumable, and most conventional mortgages are not assumable.
The process of assuming a mortgage
An assumable mortgage is a type of home financing arrangement where an outstanding mortgage and its terms are transferred from the current owner to the buyer. The buyer can avoid obtaining their own mortgage, which may have a higher interest rate. The two ways to assume a mortgage are novation and simple assumption. Novation is the safest type, as the lender agrees to let the buyer take responsibility for the existing mortgage. The less common simple assumption is a private transfer of responsibility without the mortgage lender's approval.
- Confirm that the loan is assumable: Check the mortgage contract for an assumable clause or ask the existing lender.
- Prepare for the costs: You will need to make a down payment, pay an assumption fee, and potentially cover other costs. The down payment depends on how much equity the seller has built up.
- Submit your application: Provide proof of income and assets, and submit to a credit check.
- Close and sign liability release: If the assumption is approved, fill out the necessary paperwork.
- Sign the promissory note: Once you sign, you are responsible for the mortgage payments.
There are platforms such as Roam and Assumable that can help buyers and sellers with the process of finding and buying homes with assumable mortgages.
Frequently asked questions
An assumable mortgage is one that a buyer of a home can take over from the seller, with lender approval, with little to no change in terms, especially interest rate. The buyer agrees to make all future payments on the loan as if they took out the original loan.
There are unique financial benefits for both buyers and sellers. Buyers may get a lower interest rate and fewer out-of-pocket costs. Sellers can attract more offers and command a higher sale price.
You can use platforms such as Roam, AssumeList, and Assumable to find assumable mortgages. These platforms allow you to search for homes with assumable mortgages based on location and other criteria.
To assume a mortgage, you typically need to meet the lender's requirements, including a minimum credit score, income verification, and other factors. For VA loans, a minimum credit score of 620 is generally preferred. USDA loans typically require a minimum credit score of 640.
Once you've found a home with an assumable mortgage, you'll need to work with the seller and the lender to ensure a smooth transition. You'll need to compensate the seller for the amount of the mortgage they've paid off, which is essentially part of your down payment. You may also need to pay an assumption fee to the lender.
