Question about selling home with assumable FHA loan

4 Replies

Hello all. Thanks ahead of time for the time and input. So we bought our first home in 2009 with an FHA loan at 3.75%. I know the load is assumable. We moved and have rented it out for about 5 years. We want to sell and reinvest and the tenants have agreed to purchase, assuming we can work out all the financing and they can get approved. I'm offering them the option to assume our loan but I'm trying to sort out the details. They don't seem to be very financially savvy, so I'm trying to help them see the benefit and understand their options at least.


The balance on the loan is $163k and we've made extra payments so the loan is at about the 18 year mark on the 30 year amortization curve/table, with no more PMI. The agreed to sale price is $270k. So as I understand it, they could assume our $163k loan, then of course they'd have to come up with the rest between downpayment and a second loan. It sounds like they're looking at FHA loans anyways as the downpayment is a stretch for them.

So can they just get a second FHA loan to cover the difference? Is that how that would work? Or on an assumable loan, does it only really work if you bring the balance as cash?

If there are any good resources someone could point me to I'd appreciate it. 

Originally posted by @Jon Ostojic :

Hello all. Thanks ahead of time for the time and input. So we bought our first home in 2009 with an FHA loan at 3.75%. I know the load is assumable. We moved and have rented it out for about 5 years. We want to sell and reinvest and the tenants have agreed to purchase, assuming we can work out all the financing and they can get approved. I'm offering them the option to assume our loan but I'm trying to sort out the details. They don't seem to be very financially savvy, so I'm trying to help them see the benefit and understand their options at least.


The balance on the loan is $163k and we've made extra payments so the loan is at about the 18 year mark on the 30 year amortization curve/table, with no more PMI. The agreed to sale price is $270k. So as I understand it, they could assume our $163k loan, then of course they'd have to come up with the rest between downpayment and a second loan. It sounds like they're looking at FHA loans anyways as the downpayment is a stretch for them.

So can they just get a second FHA loan to cover the difference? Is that how that would work? Or on an assumable loan, does it only really work if you bring the balance as cash?

If there are any good resources someone could point me to I'd appreciate it. 

I don't know the exact answer to the question you are asking but FHA has a 3.5% down program and the amount they will lend will max out at some number, depending on where the property is located. It's best to contact a mortgage broker in the city that the property is in and ask specifics. The buyers will have to qualify for the loan of course.

Also, I would talk to an accountant about having not lived in the house for 5 years and selling. It may have tax implications you are not aware of. You may want to ask about 1031 exchanges.

No, they can not get another fha loan or likely any other second mtg loan with less than 20% down. The higher rate in the second mtg would negate any benefit of the lower existing loan rate anyway.
This is the problem with an assumption....the buyer needs the difference in cash usually.
If they can qualify to buy it with a new fha loan, then great.
Usually, your best bet is to just put it on the open market.

Yes, the plan is to do a 1031. That's part of the reason I'd like to sell to the tenants, to get a flexible closing date and essentially some flexibility on the 45 day identification window.

Originally posted by Account Closed:
Originally posted by @Jon Ostojic:

Hello all. Thanks ahead of time for the time and input. So we bought our first home in 2009 with an FHA loan at 3.75%. I know the load is assumable. We moved and have rented it out for about 5 years. We want to sell and reinvest and the tenants have agreed to purchase, assuming we can work out all the financing and they can get approved. I'm offering them the option to assume our loan but I'm trying to sort out the details. They don't seem to be very financially savvy, so I'm trying to help them see the benefit and understand their options at least.


The balance on the loan is $163k and we've made extra payments so the loan is at about the 18 year mark on the 30 year amortization curve/table, with no more PMI. The agreed to sale price is $270k. So as I understand it, they could assume our $163k loan, then of course they'd have to come up with the rest between downpayment and a second loan. It sounds like they're looking at FHA loans anyways as the downpayment is a stretch for them.

So can they just get a second FHA loan to cover the difference? Is that how that would work? Or on an assumable loan, does it only really work if you bring the balance as cash?

If there are any good resources someone could point me to I'd appreciate it. 

I don't know the exact answer to the question you are asking but FHA has a 3.5% down program and the amount they will lend will max out at some number, depending on where the property is located. It's best to contact a mortgage broker in the city that the property is in and ask specifics. The buyers will have to qualify for the loan of course.

Also, I would talk to an accountant about having not lived in the house for 5 years and selling. It may have tax implications you are not aware of. You may want to ask about 1031 exchanges.

Originally posted by @Wayne Brooks :

No, they can not get another fha loan or likely any other second mtg loan with less than 20% down. The higher rate in the second mtg would negate any benefit of the lower existing loan rate anyway.
This is the problem with an assumption....the buyer needs the difference in cash usually.
If they can qualify to buy it with a new fha loan, then great.
Usually, your best bet is to just put it on the open market.

 Hmm. That's too bad. I know they don't have 20% down. Oh well. Thanks for the info.