Finding a home with an assumable mortgage requires a focused approach and patience. While it’s not an easy or fast hunt, it can be well worth your efforts.
Assuming a mortgage with a lower rate than the current market offerings can indeed be highly appealing, particularly when the loan balance is substantial compared to the home’s value. This scenario is advantageous because the existing balance carries the lower assumable rate. For instance, suppose you’re purchasing a $400,000 home and prevailing mortgage rates are at 7%. In such a case, it’s more favourable to assume a significant portion of the existing balance at the lower assumable rate. By assuming more at the lower rate, you minimize the amount you need to finance at the higher 7% rate to bridge the gap between the sale price and the assumable mortgage. This strategy can result in substantial savings over the life of the loan.
Here are some ways to locate these types of listings:
Ways to Locate Listings:
Partner with an Experienced Agent:
Connect with a real estate agent familiar with assumable mortgage listings in your market. An experienced agent can guide you through the process, identify homes with assumable mortgages, and assist in negotiating terms.
Some real estate you can Connect :
HomeLight:
HomeLight can connect you with top-performing real estate agents who understand the ins and outs of assumable mortgage listings in your local market .
Some Service Areas:
| San Antonio, TX | Denver, CO |
| El Paso, TX | Aurora, CO |
| Odessa, TX | Colorado Springs, CO |
| San Diego, CA | Miami, FL |
| Los Angeles, CA | Tampa, FL |
| San Francisco, CA | Orlando, FL |
| Riverside, CA | Tallahassee, FL |
| San Jose, CA | More Details |
| Bakersfield, CA |
Visit HomeLight to get started.
AssumeList™:
AssumeList™ is a platform that maintains a network of experienced agents to help you find homes with assumable mortgages.
Access to AssumeList’s searchable database incurs a monthly fee, typically ranging from $49 to $69, which subscribers can cancel at any time. For additional details, users can refer to the company’s FAQ page. As a real estate search platform catering to both homebuyers and agents seeking properties with assumable mortgages, whether they are listed or off-market.
Michael Lorino, the company’s founder and CEO, underscores their mission: “Our goal is to enhance homeownership affordability for a broader demographic.” Lorino highlights that all AssumeList properties boast interest rates under 5%, with the majority offering rates of 3% or lower, enabling buyers to potentially save significant sums on interest payments monthly.
It’s designed to assist buyers in locating properties with this unique financing option .
AssumeList™ for finding homes with assumable mortgages:
| State | Service Areas |
| Arizona | Maricopa, Pima, Pinal |
| California | Alameda, Los Angeles, San Bernardino, Butte, Madera, San Diego, Contra Costa, Mariposa, San Luis Obispo, Fresno, Mendocino, San Mateo, Glenn, Merced, Santa Barbara, Imperial, Monterey |
| Colorado | Adams, Denver, Jefferson, Arapahoe, Douglas, Park, Boulder, Elbert, Teller, Broomfield, El Paso, Clear Creek, Gilpin |
| Delaware | All Counties and Cities |
| Florida | Alachua, Manatee, Pinellas, Charlotte, Marion, Polk, DeSoto, Okeechobee, Sarasota, Flagler, Orange, Seminole, Hillsborough, Osceola, Sumter, Lake, Pasco (Volusia County limited) |
| Illinois | Bond, Edgar, Macoupin, Boone, Effingham, Madison, Bureau, Ford, McHenry, Calhoun, Grundy, McLean, Carroll, Iroquois, Montgomery, Champaign, Jasper, Moultrie, Christian, Jersey, Ogle |
| Maryland | All Counties and Cities (Coming Soon) |
| Nevada | Clark, Nye, Lincoln, White Pine |
| New Jersey | Burlington, Gloucester, Ocean, Camden, Hunterdon, Salem, Cumberland, Mercer, Somerset |
| Pennsylvania | Adams, Delaware, Montgomery, Berks, Franklin, Perry, Bucks, Fulton, Philadelphia, Centre, Schuylkill, Chester, Lancaster, York, Cumberland, Lebanon, Dauphin (Mifflin and Juniata limited) |
| Texas | TBD (Northern & Central Virginia), Alexandria City, Fauquier, Prince William, Arlington, Fredericksburg, Rappahannock, Caroline, King George, Stafford, Clarke, Louisa, Spotsylvania, Culpeper, Loudoun, Warren, Fairfax City, Manassas City, Westmoreland, Fairfax, Manassas Park, Falls Church City, Orange, Shenandoah Valley, Frederick, Shenandoah, Page, Winchester City, Hampton Roads, Chesapeake City, Norfolk City, Virginia Beach, Hampton City, Poquoson City, Williamsburg City, Isle of Wight, Portsmouth City, York, James City, Southampton, Newport News, Suffolk City, Washington D.C. (All Areas) |
| West Virginia | Berkeley, Hardy |
Search Real Estate Listings:
- Online Platforms: Utilize real estate listing websites like Zillow, Redfin, or local platforms.
- Keyword Search: Look for terms like “assumable mortgage” or “seller financing” in property descriptions.
- Direct Inquiry: When you find a property of interest, directly inquire with the seller (or have your agent ask) about the existence of an assumable mortgage.
Scour MLS Listings:
- The Multiple Listing Service (MLS) is a comprehensive database used by real estate professionals. Ask your agent to search for homes with assumable mortgages within the MLS.
Target Distressed Properties:
- Distressed properties (e.g., foreclosures or short sales) may have assumable mortgages, as motivated sellers seek to offload properties.
Review Mortgage Contracts and Disclosures:
- Check Mortgage Documents: Review the mortgage or deed of trust to determine if it explicitly states that it’s assumable.
- Closing Disclosure: Examine the loan’s closing disclosure for any information related to assumability.
Assumable mortgages are relatively rare, so persistence and thorough research are crucial. Consulting with your agent and exploring various avenues can help you find the right home with an assumable mortgage.
Understanding Assumable mortgage
An assumable mortgage is a type of mortgage loan that allows a buyer to take over, or assume, the seller’s existing mortgage when purchasing a property. Essentially, the buyer agrees to take over the seller’s mortgage terms, including the interest rate, remaining loan balance, and repayment period.
Assumable mortgages can be advantageous for buyers, especially when interest rates are higher than the current market rates. By assuming the seller’s mortgage, the buyer can potentially secure a lower interest rate than they would be able to obtain with a new mortgage loan. Additionally, assumable mortgages may have lower closing costs compared to obtaining a new mortgage.
However, not all mortgages are assumable, and even among those that are, there may be restrictions or requirements set by the lender. For example, the buyer may need to qualify for assuming the loan based on creditworthiness and financial stability. Additionally, the lender may charge an assumption fee for processing the transfer of the mortgage.
Overall, assumable mortgages can provide benefits for both buyers and sellers, but it’s essential to carefully review the terms and conditions of the existing mortgage and consult with a financial advisor or real estate professional before proceeding with an assumption.
The types of mortgage loans that are assumable:
FHA loans:
- Requirements: You need to meet standard FHA loan requirements, including a minimum down payment of 3.5% and a credit score of at least 580.
- Assumption Process: The new borrower assumes the existing FHA loan terms.
VA loans:
- Eligibility: While you don’t need to be a military member or veteran to assume a VA loan, the lender evaluates your creditworthiness. A credit score of 620 and above is typically preferred.
- VA Funding Fee: The new borrower still needs to pay the VA funding fee.
- Assumption Process: Similar to FHA loans, the new borrower assumes the existing VA loan terms.
USDA loans:
- Assumption Process: USDA loans are usually assumed with new rates and terms. However, in specific cases like transfers between family members, they can be assumed with the same rate and terms.
- Requirements: Minimum credit score of 620, meeting income limits, and location requirements.
Advantage of Assumable Mortgages:
- Lower Interest Rate: If the original mortgage’s interest rate is lower than current market rates, assuming the mortgage allows you to lock in that favourable rate, which can be a significant advantage, especially in a rising interest rate environment.
- Lower Fees: Assumable mortgages may have lower closing costs compared to obtaining a new mortgage, which can save you money upfront.
- Cost-Effective Financing: Assuming an existing mortgage can be a cost-effective way to finance a home purchase, potentially saving you money over the life of the loan.
Cons of Assumable Mortgages:
Limited Lender Choice: Borrowers are restricted to working with the existing lender when assuming a mortgage, which means they may miss out on potential benefits or better terms offered by other lenders.
Down Payment Requirement: Even when assuming a mortgage, borrowers may still need to make a down payment, as the seller’s remaining loan balance may not cover the full purchase price of the home.
Not All Mortgages Are Assumable: Conventional loans cannot be assumed, limiting the options for borrowers who are interested in this type of financing.
Why Use an Assumable Mortgage?
- Rate Advantage: If rates have risen since the original loan was made, assuming an older mortgage with a lower rate can be advantageous. This can potentially save you a significant amount of money on interest payments over the life of the loan.
- Historical Example: In times when mortgage rates fluctuate, like when Freddie Mac’s weekly average mortgage rate dipped to 2.65% for a 30-year fixed-rate mortgage, assuming such a mortgage would have been advantageous compared to rates rising above 3% later.
Overall, while assumable mortgages offer several advantages, such as lower interest rates and reduced closing costs, borrowers should carefully consider the limitations and requirements associated with this type of financing before making a decision. Consulting with a financial advisor or real estate professional can help borrowers determine whether an assumable mortgage is the right choice for their specific circumstances.