Assumable Loans to obtain past interest rates.

Rental Property Investor · Florence, OR · Member since 2017 · 4 posts · 1 vote

Does anyone have experience in assuming someone else's mortgage for a fee? I'm looking at buying a SFH that had a refinance back in 2020, so I am assuming the interest rates on the mortgage are lower than they would be to create a new mortgage today.

I figure I could pay the sellers a lump sum and if the mortgage is assumable, go through the process with the lender to have the mortgage transferred to myself.

Is there a certain way I might make this more enticing to the sellers? there wouldn't be any originating fees or closing fees I imagine.

or am I completely wrong and the lender would bring the interest up to market rates?

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Alex Fenske

Real Estate Agent · Mokena, IL · Member since 2011 · 89 posts · 63 votes

As @Kevin Woodard said, all government-insured loans are assumable AND the borrower must qualify. If you can complete the assumption, the mortgage is removed completely from the seller's name and they walk away with no lasting liability the same as if you obtained a new loan. There still will be some fees involved, but somewhat lower than a new loan, and often you won't have to pay for an appraisal.

The catch here is that the buyer must be an owner occupant or, alternatively, willing to commit mortgage fraud. There are a very small number of assumable loans out there that were originally written as non-owner-occupant mortgages and therefore are assumable by new non-owner-occupants, but they are exceptionally rare.

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Chris SeveneyBusiness Member
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Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
4y
Quote from @Chase Olson:

Does anyone have experience in assuming someone else's mortgage for a fee? I'm looking at buying a SFH that had a refinance back in 2020, so I am assuming the interest rates on the mortgage are lower than they would be to create a new mortgage today.

I figure I could pay the sellers a lump sum and if the mortgage is assumable, go through the process with the lender to have the mortgage transferred to myself.

Is there a certain way I might make this more enticing to the sellers? there wouldn't be any originating fees or closing fees I imagine.
or am I completely wrong and the lender would bring the interest up to market rates?

Lenders is most scenarios do not allow assumption. They have to requalify you as a borrower and send you through the entire process - which if you assumed they would be doing for no cost. Plus the cost of the loan today is at a much higher rate. They have no incentive at all.
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Stephen Strauss
Member since 2022 · 3 posts · 1 vote
3y
I've read that every government backed loan is assumable. I have been looking into this hoping to do it myself but don't have any first had experience yet.
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Kevin Woodard
Lender · Nationwide · Member since 2021 · 220 posts · 105 votes
3y
Quote from @Stephen Strauss:

I've read that every government backed loan is assumable. I have been looking into this hoping to do it myself but don't have any first had experience yet.
That’s right VA,FHA and USDA. The buyer will have to qualify for the purchase and the lender agree to the sale.

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Alex Fenske
Real Estate Agent · Mokena, IL · Member since 2011 · 89 posts · 63 votes
3y
As @Kevin Woodard said, all government-insured loans are assumable AND the borrower must qualify. If you can complete the assumption, the mortgage is removed completely from the seller's name and they walk away with no lasting liability the same as if you obtained a new loan. There still will be some fees involved, but somewhat lower than a new loan, and often you won't have to pay for an appraisal.
The catch here is that the buyer must be an owner occupant or, alternatively, willing to commit mortgage fraud. There are a very small number of assumable loans out there that were originally written as non-owner-occupant mortgages and therefore are assumable by new non-owner-occupants, but they are exceptionally rare.
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