Buying Homes with an Assumable Mortgage

Qualified homebuyers can purchase a home with VA or FHA government financing and assume the current mortgage. This is not a new program – it has been around for decades – but it’s becoming more popular for both buyers who want a lower interest rate and sellers who want to sell their home in a market that is dealing with higher interest rates.

Once the home closes escrow through the title company, as normal, then the seller is off the loan and the loan becomes the new buyer’s loan.

Investors who do not plan to occupy the home can assume a VA loan.

Homebuyers who intend to occupy the property can assume both VA and FHA loans.

The timing to complete this process can take longer because we need to have the loan servicer process paperwork on their end, so plan on 45 days or more.

There is a savings on closing costs because the buyer does not need an appraisal, there is no lender title insurance, no lender closing costs as with a new mortgage. The servicing company charges 1% to the buyer at the closing.

The first thing necessary is to fill out the prescreening information on the processor’s website.

Complete the prescreen info here: www.applyUMe.com

Here is an article written by Mike Roberts who is a co-owner of UMe, a mortgage assumption processing company. 

Please read below and let’s set up a call to talk about this and how I can help you, your family members, and friends.   Deanna 480.250.5675.

Never Assume Anything… Except A Low Rate. Assume That. 

By Mike Roberts

“Now that assumptions are becoming more and more popular, many news agencies are starting to report on them. The problem is that the information they are giving the public is seldom correct. Sure, they get parts right…but I haven’t seen a single article that got it all right. You can’t “assume” that even the largest of news agencies are reliable. 

There are many reasons for this. Assumption loans are still the wild west when it comes to the rules. Many of the guidelines are a bit gray and lead to interpretation. Some lenders may interpret one way and others another. For example, FHA and VA allow servicers (a seller’s current mortgage company) to place some overlays to underwriting guidelines. The spirit of this is to maintain prudent underwriting – meaning not allowing a person to assume a loan that they may not be able to afford.

The problem with this is that some servicers use this ability to discourage assumptions altogether. (Servicers lose money when they process an assumption.  Discouraging assumptions is not allowed.

Some overlays that could be seen as acceptable may include minimum credit scores, more stringent debt to income ratios and others. Some that are NOT acceptable might be: investors not allowed to assume a VA loan, can only be assumed by a relative, seller must be going through a financial hardship and any others that are designed to make assuming a loan nearly impossible. 

In general, don’t take everything you read or hear at face value. Make sure to connect with an assumption expert to get reliable information.”

Categorised in: Buying A Home, Selling A Home