Why Consider an Assumable Loan?

 Current interest rates are hovering somewhere around 7%. By assuming an existing loan, you may be able to find a rate closer to 3-3.5%! This can significantly reduce your monthly payments and overall interest paid over the life of the loan. 

So what is the catch? 

  1. Owner-Occupant Requirement: Most assumable loans are government-backed FHA or VA loans that require the buyer to be an owner-occupant. Unfortunately, this means investors are not eligible in most cases.
  2. Significant Down Payment: You’ll need to cover the difference between the home’s purchase price and the existing loan balance. This typically requires a down payment of at least $75,000 to $100,000 or much more if the home has been owned for many years or was purchased originally with a large down payment.
  3. Approval Timeframe: The approval process for assuming a loan can take 90-120 days or longer. Patience is key, as loan servicers are not always quick to handle these requests.
  4. Negotiating with Sellers: Sellers may prefer quicker closing offers over waiting for an assumable loan approval. You might need to offer a higher price to make it worth their while or being willing to pay above market rate for a home that has a potentially assumable loan, but has not sold at its current price.
  5. Limited Inventory: Homes with assumable loans are not abundant, so flexibility in your home search is crucial. Whether a home has a loan that can be assumed has to be the primary attribute you are using to find a property. You will need to be flexible on most other attributes because the supply of homes is very limited.

Despite these factors, the potential savings are substantial. Lower interest rates mean more affordable monthly payments and significant savings over the life of your mortgage.

 If you’re ready to explore this option, even with the limitations I just mentioned, I’m here to help.

 You can place yourself on my calendar Here for a consultation.

 Or, if you just have questions, please feel free to e-mail back or give me a call/text.

Posted by Patrick Hake on
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