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Why Assumable Mortgages Might Be Your Best Bet in this Market

High interest rates can pose a significant challenge for prospective home buyers in today's real estate market. With numerous mortgage options, selecting the right one tailored to your financial needs is crucial. One often overlooked yet beneficial option is the assumable mortgage. This guide will delve into assumable mortgages, highlighting their workings, benefits, drawbacks, and tips when opting for one.

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In this article:

What Is an Assumable Mortgage?

It allows the buyer to take over the seller's current mortgage loan, retaining the original terms, including the interest rate, repayment period, and principal balance. This can be especially beneficial if the initial loan has a lower interest rate than the current market rates.

Types of Assumable Mortgages

FHA Loans

Federal Housing Administration (FHA) loans are assumable with some conditions. The buyer and seller must meet specific criteria, including living in the home as a primary residence and passing the standard FHA loan application process. FHA loans offer easier qualification, particularly for individuals with less-than-perfect credit, with a minimum credit score requirement of 580.

VA Loans

Both qualified military personnel and non-military buyers can assume Veterans Affairs (VA) loans. However, if a non-military buyer assumes the loan, the seller might lose their VA entitlement. Sometimes, lender approval is needed from the Regional VA Loan Center.

USDA Loans

United States Department of Agriculture (USDA) loans are also assumable but often require the lender's and USDA's approval. Exceptions are made for successors in interest, such as family transfers. 

How Does an Assumable Mortgage Work?

Assuming a mortgage involves the buyer taking over the seller's loan under the same terms. The process typically requires lender approval, and the buyer must compensate the seller for the equity they've built up. No appraisal is necessary, potentially saving the buyer money. However, the seller risks liability if the buyer defaults on payments unless a liability release is obtained.

Pros and Cons of Assumable Mortgages


  • Easier Home Sale: Homes with assumable mortgages can attract buyers due to potentially lower interest rates.

  • Cost Savings: Buyers can save money over the life of the loan with a lower interest rate and no appraisal costs.


  • Financial Risk: Sellers may remain liable for the mortgage if the buyer defaults.

  • Limited to Government-Backed Loans: Most conventional mortgages are not assumable. The primary loans that can be assumed are FHA, VA, and USDA. Furthermore, buyers often receive new terms and interest rates when taking over a USDA loan rather than retaining the seller's possibly lower rates.

  • Difficulty Identifying Assumable Mortgages: It can be challenging to find homes with assumable mortgages unless they are explicitly stated in the property listing or discovered through your real estate agent. Many sellers do not highlight this feature, making it hard for buyers to locate such opportunities.

  • Approval Uncertainty: Buyers must meet the lender's credit qualifications, and approval is not guaranteed.

How to Qualify for an Assumable Mortgage

Qualifying for an assumable mortgage requires meeting the lender's credit score and debt-to-income ratio requirements. Additional documentation may be necessary, such as employment history and asset verification. Consulting with a mortgage expert can clarify specific requirements and streamline the process.

Costs Associated with Assuming a Mortgage

Costs vary depending on lender and investor policies. Fees may be a percentage of the unpaid principal balance or a flat fee. VA loans require a funding fee of 0.5% of the remaining balance, which is exempt for certain qualifying individuals. State laws may limit assumption fees, so check local regulations.

Historical Context of Assumable Mortgages

Assumable mortgages have been part of the lending landscape for many decades. Before the 1980s, assumable mortgages were quite common, providing an easy transfer of loans between property owners—however, the passage of the Garn-St. Germain Act in 1982 changed this landscape significantly. This Act allowed lenders to enforce due-on-sale clauses, which mandate that the mortgage be paid in full when the property is sold. Despite these changes, FHA, VA, and USDA loans retained their assumable nature, providing a valuable option for buyers looking to secure favorable loan terms.


Assumable mortgages offer buyers a unique opportunity to secure favorable loan terms, potentially lower interest rates, and a simplified home-buying process. However, they come with risks and limitations. Thorough research, understanding of the process, and consulting with experts can help determine if this option is right for you.


What is an assumable mortgage?

An assumable mortgage allows a buyer to take over the seller's existing mortgage, retaining the original loan terms.

Which loans are typically assumable?

What are the benefits of assuming a mortgage?

How can I qualify for an assumable mortgage?

How much does it cost to assume a mortgage?


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