Taking Over a Seller’s Loan

A key, but little-known, selling point of homes whose owners have a Federal Housing Administration or Department of Veterans Affairs mortgage is loan “assumability.” When the property is put up for resale, new buyers may be able to take over the existing mortgage rather than apply for new financing. This option may benefit some buyers by conveying a low mortgage rate at a time when interest is climbing, minimizing settlement fees, and eliminating the appraisal requirement. “You could now have a seller saying, ‘I have a great house to sell you and a great mortgage to go with it, which is better than my neighbor, who only has a great house,'” says New York-based real estate attorney Marc Israel. “It’s a very clever idea.” Katie Miller of Navy Federal Credit Union agrees that under the right circumstances, loan assumptions can be a good choice for buyers. “In a rising rate environment, assumability is a very attractive option,” she remarks. “It ends up making homes that much more affordable.” However, buyers who want to assume a seller’s mortgage still must demonstrate their creditworthiness just as they would for any FHA or VA loan. | Read More