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Psst…. Did you know that many sellers have incredible assumable interest rates? It’s true, VA and FHA buyers who bought or refinanced when the interest rates were incredible low may be willing to allow qualified buyers to assume their interest rate. I know what you are thinking; Tosha, surely, sellers home owners with incredible subprime mortgages aren’t selling their homes. It may come as a surprise but many life changes cause people to move and sometimes people have to leave behind incredible mortgage rates. If you have been on the sidelines considering home ownership but can’t stomach the current interest rates then it’s worth asking if your agent to help find if there are homes in you area that you may be able to assume the sellers current interest rate. Here are a few things you should know when it comes to assuming a loan.
Number one, you must be qualified. VA loans as typically assumable by qualifying Veterans. If you have already been pre-qualified for a VA loan there is a good chance you can qualify to assume someones VA loan. If you have already been pre-qualified for an FHA Loan there is a good chance you can pre-qualify for an assumption. You will need to be qualified by the current carrier of the loan you are trying to assume. This means if you have already been pre-approved with a lender you will need to go through the process again with the Mortgage provider who is holding the loan. There can be fees associated with a loan assumption, you will need to speak directly to the mortgage carrier to fine out exactly what fees may apply.
Number two, when you are assuming a loan you are picking where the seller left off. You assume their rate, their payment (differences in insurance and taxes may apply), and their equity position. If the seller had paid down a hefty chunk of their mortgage and have a lot of equity you must come up the difference. This works out great for some buyers who were ready to put down a larger down payment but can be challenging for buyers who don’t have a lot saved up for a down payment. It also means that if the seller has 25 years left on the mortgage instead of 30 the buyer inherits that as well. A more mature loan means more money goes to the principle each time you pay your mortgage.
Number three; Loan assumptions can take longer than a traditional loan process, not every seller is willing to wait. Each loan is as unique as the house its attached to so every assumption process will be different. It is important to talk directly with a trusted Mortgage professional to see if this options is worth considering for you. There is plenty more to learn about mortgage rate assumption but for the details I would suggest you speak to a mortgage professional.
