If you’re on the hunt for your next home, you may be curious about financing options. Outside a traditional home loan, some homebuyers opt for an assumable mortgage. Understanding what loan assumption is gives you a better idea of financing alternatives and in turn can land you the home of your dreams.
What is a mortgage assumption?
Mortgage assumption is the act of taking over the remaining balance of the previous property owner’s mortgage loan. All loan conditions will remain intact including interest rates, loan term and loan balance.
Do I need a down payment when assuming a mortgage?
The value of the home may have increased since the original owner purchased the property. The difference between the original value and current value will be the amount you’d pay on the down payment.
Which mortgage loan types are assumable?
As a standard, government-backed loans are applicable to be assumed. Conventional loans can be assumed, but this option is not the most ideal for most buyers as oftentimes, the lender will require the whole sum of the remaining balance be paid at the closing of the property.
FHA loans are a bit more lenient and in most cases only need approval from a lender. VA loans can be assumed, but come with a few extra stipulations and rules. These include:
- No approval needed or mortgages originating prior to March 1, 1988.
- Loans acquired after this date need lender approval.
- Borrower must be a veteran, active duty service member or an eligible spouse.
Loan assumption may be beneficial as it often comes with lower interest rates and less debt. However, with a higher down payment and additional fees, it pays to do research to figure out if this loan option is best for you.
About the Author
Jamie Jamieson
Professional Association National Association of Realtors (NAR) New York State Association of Realtors (NYSAR) Hudson Gateway Association of Realtors/ Hudson Gateway Multiple Listing Service Education I hold an A.A in Italian Studies and an A.S in Accounting as well as being one of few students accepted into the Cambridge University International Student Study Program abroad as a returning student in 2011. Community Involvement I am proud to serve on the Home & School Board for St. Augustine School in Ossining and maintain the role of a Girl Scout leader. I am an active member of the community assisting in a variety of fundraising efforts. Personal I am a young and energetic agent who prides myself on providing personalized service with honest representation whether you are buying or selling your home. My expertise of the river towns, attention to detail and excitement for real estate are a few of the many assets I will bring to you. I will utilize my eagerness and market knowledge of the area to build lasting relationships with all of my clients that will extend far beyond the closing table. Be at ease from start to finish with my help. In my spare time, I love exploring the Hudson Valley with my husband, three children and our dog, Pippin. I love scoping out the infinite restaurants, farmers markets and other fabulous activities this exciting county has to offer. Experience Before joining William Raveis Legends Realty Group I started my career with Hudson Homes Sotheby's International Realty team. Prior to real estate, I had a remarkable 15+ year career in Restaurant Management/Hospitality including Ruth's Chris Steakhouse, Rivermarket and several establishments in Newport, Rhode Island. My experience in that field provided me with the foundation of excellence in customer service. Areas Covered All of Westchester County and parts of Putnam County.