What I need to know about an ASSUMABLE MORTGAGE!

Question

In looking for my next investment I came across a property in Florida that has an Assumable Mortgage. Now while I am aware of what this means I am curious what the real scoop on these are. Pros vs. Cons and what did you wish someone had told you before you got involved in one? In my research it sounds like the note gets placed in my companies name, what about deed? Any input would be greatly appreciated.

Also, rates for property management in Fl.

Drew Sygit · Answer

@Ann Covey depends on if you do simple assumption, where the loan stays in seller's name or if you are doing fill assumption and replacing the owner on the loan Note.

If you do a simple assumption, how will you receive all the lender notices and access online account?

How attractive is the interest rate?

Tom S. · Answer

@Ann Covey  Not sure about the "closing in your company's name" part.  Almost all assumable loans are FHA or VA loans, which I believe have to be closed in your own name.

Definitely check on that with the seller's bank and their process for assuming the loan.

Tom S. · Answer

@Kelly Boulton I would assume she could put it in a trust at or after closing, but of course she would have to check with the lender.

Kelly Boulton · Answer

Great point!  I don't see any reason she couldn't put it in a trust though, right?

Kelly Boulton · Answer

I think someone else may have replied to this already, but yes DTI is considered.  The process is underwritten in the same way that a normal mortgage would be.  Also, the larger down payment can be the case depending on the remaining mortgage balance vs. the sales price.  Say you are assuming a mortgage on a property that has $250k remaining balance, but the seller is asking and you've agreed to pay $300k.  The $50,000 gap would be your down payment.

Eli Kantor · Answer

A few things about an assumable mortgage; As you know, in a high interest rate environment, assuming a loan at a lower rate is great for saving on your monthly payments. However, keep in mind that the difference between the sale price and the loan amount must be brought to the table by you. Thus, if you want to avoid a substantial down payment, a loan assumption will only work when assuming loans from sellers with a high LTV. Also, most loan assumptions are available only for government-insured/guaranteed loans (FHA, VA, etc.), so keep that in mind when shopping around.

Chris Seveney · Answer

@Ann Covey

You will still need to qualify for the loan - meaning they will underwrite you to make sure you can afford the payments

Ann Covey · Answer

Great point @Tom S., ty!

Ann Covey · Answer

Also, I have read something about a bigger down payment, but wondering how this works if I were to assume the existing loan?

Ann Covey · Answer

I assume the bank looks at the property and income towards the debt to income ratio as well? Probably a better banker question.

What I need to know about an ASSUMABLE MORTGAGE!

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