Assumed Mortgage Question

[Bryan Wilson]

So I've been searching and haven't found much around the topic of assuming another person's mortgage. I have a friend who is moving and originally purchased his property with a Standard FHA loan. I'm attempting to assume the mortgage and pay him the difference on the agreed upon price. The house is worth approximately $255k and we agreed to $240k it has a tenant renting in place.

Does anyone have history in assuming mortgages and a do and don't list they may be willing to share?  Conventional financing with 20% down is our other option here in Colorado Springs without using a hard money or private money lender.  

Would you be able to assume the mortgage and take out a loan for the down payment?  The monthly cashflow would cover the cost of repayment.  I'm just thinking out loud now at this point.  

[Andrew Postell]

@Bryan Wilson thanks for asking about the assumability of a loan. This isn't talked about very often and is a great strategy when it is applicable. FHA/VA/USDA loans are all assumable. The reason why these loans types are assumable is because they DO NOT have a "Due on Sale" clause @Norberto Villanueva .  With no "Due on Sale" clause you can transfer title to an many people as you like...or assume the loan.

In order to assume a loan you will need to speak with the mortgage holder of the loan (the bank which the current home owner makes their payments to), qualify for the loan, and probably pay somewhere around a $400-$600 transfer fee to the bank.  The bank will not require a downpayment...remember, you are assuming the loan.  But if the seller of the home wants additional money over the mortgage, you also won't be able to wrap that money into the loan.  The loan stays just as it is, balance, terms, payment, and even the interest rate.  So make sure that the terms of the loan are better than what you can get today before committing.

One really important item to note is that FHA/VA/USDA loans all require you to live in the property...and that will be a condition to assume the loan. For most investors, this isn't a likely action but if it works in your situation then by all means please explore it.

Feel free to ask more questions if you need.  Thanks!