The loan comes with the house: assumable FHA/VA math at 7%

The loan comes with the house: assumable FHA/VA math at 7%

Real Estate Agent · Louisville, KY · Member since 2017 · 1k+ posts · 1k+ votes

Some houses come with a loan attached that no bank will ever write again. A 2.75% loan. A 3% loan. Sitting inside a house that's for sale right now, and the next buyer can take it over.

When I ran our MLS, 26 active listings in Kentucky were flagged assumable. Out of roughly 4,500. Then I searched every listing's public description and private remarks for the word itself and found five more that never got the box checked. That's still only the ones somebody wrote down. Nearly half of every mortgage in America is under 4%. Most sellers have no idea their loan is worth something to the next buyer. So the deals aren't scarce. The labels are.

Which loans can move:

FHA: yes. The buyer has to qualify and live in the house.

VA: yes, and the buyer does not have to be a veteran.

USDA: yes, if the buyer meets the program's income and location rules.

Conventional: almost never. The one exception worth a phone call: some adjustable-rate loans after the fixed period ends.

FHA and VA assumptions are for people who'll live in the house. An investor buying a rental can't assume one.

The math: a $250,000 house. The seller has a 2021 FHA loan with $200,000 left at 2.75% and 25 years to go.

Take over the seller's loan: $922.62 a month (principal and interest)

New loan at 7.03%: $1,334.64 over 30 years, or $1,417.39 over the same 25 years

That's $412 to $495 a month. Over the life of the loan, the assumed 2.75% costs about $76,800 in interest. A matching new loan at 7.03% costs about $225,200. About $148,000 difference. Same house. Same buyer. Same week.

The catch: you only take over what's left on the loan. On that house you need to cover the other $50,000, plus a servicer fee (FHA caps it at $1,800) and closing costs. Three ways through it: a second loan behind the assumed one (VA has published rules allowing it; for FHA, confirm with the servicer deal by deal), the seller carries part of the gap, or cash, gift funds, or a lower price. And the assumed FHA loan keeps the seller's mortgage insurance. A 2021 FHA loan usually carries 0.85% a year, about $142 a month on $200,000. Put it in the math.

How to find the ones nobody flagged:

Anyone who bought or refinanced in 2020 or 2021 almost certainly has a rate under 4%.

Public records: an FHA mortgage carries an FHA case number, and a VA mortgage usually has a "VA Assumption Policy Rider" attached. That rider title is the fastest tell there is.

Just ask. Ask the seller for their mortgage statement. Loan type, balance, rate and servicer are all on page one. Then call the servicer's assumption department.

Four things that make it close:

Get the seller released. Approving the assumption and releasing the seller are two separate decisions.

Know the VA rule. If a non-veteran takes over a VA loan, the seller's VA benefit stays tied up until it's paid off. That belongs in the price. It never belongs in who you market to.

Build in the time. Servicers are slow. Write a 90-day contract with an assumption contingency and send a complete package on day one.

Advertise it the right way. "Seller's FHA loan may be assumable, subject to servicer approval and buyer qualification" is clean. Putting a payment in the ad triggers lending-ad disclosure rules. Never write "veterans only."

Anyone here closed an FHA assumption in the last year? What did your servicer's turnaround actually look like?

0Reply
750 views

Most Popular Reply

Mike GrudzienPro Member
Lender · Eugene, OR · Member since 2019 · 2k+ posts · 1k+ votes
6d

Wish this was longer...

See this reply in the discussion

5 Replies

Jump to latestLatest
  • Mike GrudzienPro Member
    Lender · Eugene, OR · Member since 2019 · 2k+ posts · 1k+ votes
    6d

    Wish this was longer...

  • Ryan ThomsonBusiness Member
    Real Estate Agent · Colorado Springs, CO · Member since 2018 · 1k+ posts · 1k+ votes
    5d

    I do FHA and VA assumptions full-time in Colorado Springs. Closed 7 in one quarter last year.

    The math on a current deal: $450K home with a $380K assumable loan at 2.75%. That's roughly $1,740/month PITI. Same purchase with a new loan at 7%? You're at $2,770/month. That's $1,030/month you keep. Over 30 years that's north of $370,000 in interest difference.

    The equity gap ($70K in this example) is where people get stuck. Most buyers solve it with a second mortgage, seller concession on closing costs, or bringing cash to close. It's not free but the payment savings usually justify it in under 3 years.

    One thing the thread mentions is worth underlining: FHA and VA assumptions are owner-occupant transactions. The lender is fully involved, it goes through an assumption processor (typically $750/side), and it takes 45-90 days. This is not creative financing. It's a fully sanctioned loan transfer.

    VA is where it gets interesting for investors adjacent to the military community. A non-veteran CAN assume a VA loan. The catch is the seller's VA entitlement stays tied up until the loan is paid off or a veteran buyer substitutes their own entitlement. Most sellers don't know that and it creates negotiating room.

    If you're on the Front Range and want to run numbers on a specific property, DM me. Happy to model the equity gap payback period.

    -

    The Assumable Guy544 Reviews
  • Stacy RaskinBusiness Member
    Lender · Member since 2022 · 1k+ posts · 512 votes
    4d

    Assumable mortgages are great for owner occupants. Non owner occupant real estate investors are still cash flowing. There are investors using DSCR loans due to the transaction generally having less paperwork to fund compared to a conventional loan. Also, a DSCR loan is not structured on the borrower's personal income or debt to income (DTI) ratios but on the actual or projected rents and the borrower's credit score. A down payment and closing costs are still needed- many real estate investors are finding that sellers are willing to help to with seller credits to close a deal since more markets on sitting on the market in many areas so there's more room to negotiate.

    DSCR loans allow for a higher percentage of seller credits so for some DSCR programs, it can be 6% of the purchase price. For example on a $300,000 property, if a 6% seller credit is negotiated, that's $18,000 to buy down the rate and help with closing costs. That can lower the monthly mortgage and increase cash flow. Depending on the type of loan and the real estate investor's goals there are options such as assumable mortgages or seller credits to help the borrower to increase cash flow.

  • Real Estate Agent · Louisville, KY · Member since 2017 · 1k+ posts · 1k+ votes
    4d

    Mike, thanks for reading. Tell me what you'd want added and I'll go deeper on it in a follow-up.

    Ryan, this is exactly the kind of real-deal math I was hoping someone would add. $1,030 a month is the whole story. The point I'd underline from your side of it: the equity gap is where most of these die, not the rate. When your buyers have to cover that $70K, which way do they usually go, a second mortgage, a seller concession, or cash? And does the answer change when the buyer is an investor versus an owner-occupant?

  • Real Estate Agent · Morristown, NJ · Member since 2020 · 207 posts · 128 votes
    3d

    I purchased a property using an assumable loan in New Jersey in 2026. The process with the mortgage company holder was pretty straightforward. Mine got a little complicated but that's mostly because my co-borrower and I had non simple lending situations. Definitely worth it!

Join the conversationCreate a free account to reply, vote on answers and follow this thread.