Assumable Loan Experiences

11 Replies

I'm wondering if those of you who have formally assumed a loan in the last 10 years could share your experiences. Was there an application, what was the qualifying process. If you were denied, what were the reasons given.

Technically all FHA and VA loans are assumable but I've never seen one go through. Looking forward to hearing your stories!

Originally posted by Kristine Marie Poe:
I'm wondering if those of you who have formally assumed a loan in the last 10 years could share your experiences. Was there an application, what was the qualifying process. If you were denied, what were the reasons given.

Technically all FHA and VA loans are assumable but I've never seen one go through. Looking forward to hearing your stories!

My best friend did a va loan assumption in Tulsa last year. He didn't find the process too egregious but I'll ask him the details and post them.

I haven't assumed loans but my clients have on commercial properties I have transacted which is different than residential loans.

A key will be if the lender will release the guarantee off the former owner r will require both of you to stay on the hook. Typically a 1/2 to 1 percent assumption fee. The larger the loan the lower the fee usually.

In commercial it's different in that more emphasis is put on the property and terms and less on the borrower. The borrower still needs to meet liquidity and net worth requirements to make the lender comfortable replacing the current guarantor.

Medium allworldrealtyJoel Owens, All World Realty | [email protected] | 678‑779‑2798 | http://www.AWcommercial.com | Podcast Guest on Show #47

Kristine Marie Poe

K Marie I think assumptions on SFR's are extinct.. I have not heard of one since the 90S does not mean it can't happen.. but banks are looking to make fresh fees on the new loan .. I bought my home in the Napa valley in 92 on an assumption.. We were going through the crash of 89 to 95.. seller was in default it took me 8 months but I go the house for 5k down and assumed the loan.. the country club transfer fee was 10k so I moved into Silverado Country Club for 15k total out of pocket I was pretty proud of myself... In Hind sight though I sold my Palo Alto house because it was going to be 500 a month negative... I could have swung both no problem. I only owed 300k on that the Pali house.. so left a few buck aroos on the table there. But hey it all worked out

Medium ksqoekox 400x400Jay Hinrichs, TurnKey-Reviews.com | Podcast Guest on Show #222

Originally posted by @Jay Hinrichs:

Kristine Marie Poe

K Marie I think assumptions on SFR's are extinct.. I have not heard of one since the 90S does not mean it can't happen.. but banks are looking to make fresh fees on the new loan .. I bought my home in the Napa valley in 92 on an assumption.. We were going through the crash of 89 to 95.. seller was in default it took me 8 months but I go the house for 5k down and assumed the loan.. the country club transfer fee was 10k so I moved into Silverado Country Club for 15k total out of pocket I was pretty proud of myself... In Hind sight though I sold my Palo Alto house because it was going to be 500 a month negative... I could have swung both no problem. I only owed 300k on that the Pali house.. so left a few buck aroos on the table there. But hey it all worked out

Assumption of residential properties are far from dead. Though they didn't make much sense prior to May 2013 (Bottom of mortgage rates) but with rates increasing currently they are making more and more sense. Between FHA and VA Loans there are over 9 million assumable loans across the US currently, with about 30% of them having rates lower than current rates (Around 4.20% as of this posting)

From everything I have heard regarding the process, though I have not personally gone through it, it is different due to paperwork but not more complicated or lengthy than a normal residential sale.

Originally posted by @Tyler Mills:
Originally posted by @Jay Hinrichs:

@K. Marie Poe

K Marie I think assumptions on SFR's are extinct.. I have not heard of one since the 90S does not mean it can't happen.. but banks are looking to make fresh fees on the new loan .. I bought my home in the Napa valley in 92 on an assumption.. We were going through the crash of 89 to 95.. seller was in default it took me 8 months but I go the house for 5k down and assumed the loan.. the country club transfer fee was 10k so I moved into Silverado Country Club for 15k total out of pocket I was pretty proud of myself... In Hind sight though I sold my Palo Alto house because it was going to be 500 a month negative... I could have swung both no problem. I only owed 300k on that the Pali house.. so left a few buck aroos on the table there. But hey it all worked out

Assumption of residential properties are far from dead. Though they didn't make much sense prior to May 2013 (Bottom of mortgage rates) but with rates increasing currently they are making more and more sense. Between FHA and VA Loans there are over 9 million assumable loans across the US currently, with about 30% of them having rates lower than current rates (Around 4.20% as of this posting)

From everything I have heard regarding the process, though I have not personally gone through it, it is different due to paperwork but not more complicated or lengthy than a normal residential sale.

Glad to hear assumptions aren't dead.  You mention the number of assumable loans with decent interest rates being approx. 3 million.  Would really like to hear from someone who has seen or done one in the last 5 years. 

Most people that want to assume a loan are not creditworthy or have the income.


Joe Gore

Originally posted by @Joe Gore:

Most people that want to assume a loan are not creditworthy or have the income.


Joe Gore

Considering the liability remains with the seller if an assumption is carried out with out a credit review of the buyer, this is definitely not the case.  An assumption makes sense on many levels, not just that the buyer is not creditworthy.  For an assumption to make sense for a buyer and a seller, the seller will want to get their liability released, which requires the buyer to be creditworthy.  

If a mortgage has a rate of 3.25% and current rates are at 4.20% then the buyer could save around $100 per month on their mortgage payment by assuming instead of getting a new loan.  Over the life of the loan this could be a significant amount of money.  The actual added value of an assumption with a rate lower than current rates, or the optionality of an assumption of a loan that is higher than current rates with the anticipation that rates will go above the loan rate, means it is not only an added incentive to a home, but makes the home more affordable for a buyer as rates rise, and can be an investment opportunity based on the optionality.  Because of this added value a knowledgeable seller could also properly market their house with an assumable mortgage and very likely get a better sale price, or even a slightly higher sale price.

Originally posted by @K. Marie Poe:

Glad to hear assumptions aren't dead. You mention the number of assumable loans with decent interest rates being approx. 3 million. Would really like to hear from someone who has seen or done one in the last 5 years.

You can get a good look at the currently listed homes for sale with assumable mortgages either by searching county records, or checking out sites like ww.zumption.com which specifically list and deal with assumable mortgage listings.  Though the opportunity and value is there, it has been so long since assumptions were en vogue that they still aren't that common (to the tune of a couple hundred a year) but as rates continue to rise I am sure you will be able to find people who have done an assumption recently.  The process has changed since the 80s when it was last a big deal, so the experience then vs now may not be on point, but even in the past 5 years it is hard to find people who have assumed residential loans outside of death in the family/divorce both of which are scenarios where it is most likely handled by outside parties.

Originally posted by @K. Marie Poe:

I'm wondering if those of you who have formally assumed a loan in the last 10 years could share your experiences. Was there an application, what was the qualifying process. If you were denied, what were the reasons given.

Technically all FHA and VA loans are assumable but I've never seen one go through. Looking forward to hearing your stories!

I finally remembered to ask my buddy about this. He assumed a VA loan in Tulsa. Dealt solely with the bank that held the loan. He qualified very easily so the bank approved him with no problems. He did have to pay a ~$700 fee to the VA for the loan assumption. When he was talking about this, he kept saying it was very easy (at least ten times). Anyway there is one example.

Originally posted by @Cal C.:
Originally posted by @K. Marie Poe:

I'm wondering if those of you who have formally assumed a loan in the last 10 years could share your experiences. Was there an application, what was the qualifying process. If you were denied, what were the reasons given.

Technically all FHA and VA loans are assumable but I've never seen one go through. Looking forward to hearing your stories!

I finally remembered to ask my buddy about this. He assumed a VA loan in Tulsa. Dealt solely with the bank that held the loan. He qualified very easily so the bank approved him with no problems. He did have to pay a ~$700 fee to the VA for the loan assumption. When he was talking about this, he kept saying it was very easy (at least ten times). Anyway there is one example.

The VA fee is now limited by regulation to $300, exclusive of the credit report and the application fee, but in most cases this is still going to be less than the mortgage origination fees of a new loan, so its another win for assumption.

@Tyler Mills Ok so you are saying that if a mortgage is assumable that the current rate the borrower has is locked in for the assuming party? If so, is the full UW process for new borrower merely to judge credit worthiness? I am looking @ a deal that possibly has an assumable mortgage with a very low 2.75%. This would be key if we could be locked in @ that rate. Also, my partners and I would be purchasing in our LLC, which does not have any established cashflow or history. Will this be a problem and if so then could we purchase as individual with 2 underlying partners as co-borrowers?

@Andrew Hofing Yes, you get the seller's original rate. No, you cannot purchase in the name of your LLC (and assume the existing loan). Both FHA and VA have an owner occupant requirement. However, you can purchase it in multiple names if one of the individuals intends to live there.