Are Loan Assumptions a Good Option for a Seller?

6 Replies

Disclaimer: I'm not sure if this is the right location to post my question/discussion, if it is not- my apologies.

Overview: I've recently discovered BiggerPockets while networking with several folks from work and started to notice that my initial plan might have been short sighted/poorly informed. A couple years ago, I moved to a new location and was planning on staying approximately 3-4 years. I've decided, however, a change of careers is necessary and I'm moving soon than I anticipated. I'll be leaving a job that has really good job security and this has led me to the conclusion that I should sell the Quad.

Situation: I've believe that the best option, on paper at least, and the cheapest (only $5k in total closing costs) is to find someone that is willing to assume my loan, however I'm unsure how to find someone without reaching out to a RE agent. My concern is once I list with a RE, I've committed to paying approximately $22k in commissions on the $5k closing costs. The quad hasn't had enough time to build the necessary equity and I would need to use the cash reserves for the property and some savings in order to sell using a RE agent.

Question: Has anyone worked with loan assumptions before? If so, (1) how were they able to find someone qualified/able to assume their mortgage without a RE agent and (2) was this a fiscally-safe option?

Hey @Jesse W.
Before exploring that loan assumption option, you should check the terms of the loans you have with your lender to see if it allows for it.
Most lenders ( I believe but I am be wrong) nowadays don't allow for it.
If your lenders doesn't then, you need to look at other options.

Another question is : Are you considering the loan assumption because there  is a prepayment penalty?
In NJ, prepayment penalties are not allowed on residential mortgages. I don't know what it is in your state, hence my question.

if there is no prepayment penalty and what you are trying to do is to avoid the realtors fees, you could try to sell it yourself and list it yourself on website like http://snapflatfee.com/
But you need to know what you are doing as there is a lot of paperwork involved with the sale of a house and while trying to save money, you mind end up selling at a lower price than a realtor would have for you.

Patrice,

Thanks for the quick response! I've confirmed with my lender and the VA (it's a VA Home Loan), it is an assumable mortgage. I've even contacted the assumptions department and talked through the process and requirements- and the process seems straight forward. Also, there is no prepayment penalty.

I'll definitely check out the site, much appreciated. And I concur, that RE agents bring a unique expertise to the situation. My concern is mainly the cost associated with utilizing a RE. My career change was unexpected and the property hasn't had much time to build up equity.

If you let them assume your VA loan, then your VA benefit will be locked up with them until they sell or refi. You may regret that down the road.

If they are eligible for a VA loan then your benefits can be restored. Make sure to check with your lender and the VA to make sure this is properly executed.

You can put your home on AHRN during PCS season (now through August/September) and it will be put in front of quite a few PCSing members. You may find it hard to find someone to assume your loan though, most want to use the VA loan to put 0% down. If you are asking above what you owe they will need to pay out of pocket.

Best of luck to you.

I’m not eligible for VA loan benefits but may be interested in the deal. Message me if you want to discuss further.

@Jesse W. , you're talking about a home that's worth about $400k, right? (ie. 6% of $400k = $24k). So, you bought it with basically zero down, and now want to walk away? My guess is: even if you find someone willing to assume your mortgage, unless they are prepared to pay full retail (ie. buyers found by Realtors), you'll find it hard to net that $22k difference.

Thank you for your service. Welcome to BP...

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