Strategies for Assuming Someone's Mortgage

[Eli King]

I'm seeking strategies for assuming someone else's mortgage as a primary residence. What is the best way to explore if this is an option with the seller's lender? Are there any strategies for making this more desirable for the current lender? 

[Elias Halvorson]

Hi Eli, 

A few different ways: 

1) You can ask your realtor to put you on a drip campaign for any assumable loans in the areas you desire. 

2) If you are looking at something off-market you can ask your realtor to work with their title company of choice to pull lists of all government loans, in whatever areas you are looking for. This typically costs money, maybe $.02 -.10 per record. It will be a higher cost if you are looking for names, emails, etc. 

Obviously, unless you are a veteran very few of us are going to let a non-veteran assume their VA loan. I say this to emphasize focusing on FHA and USDA mortgages in your search.

Hope this helps! 

[Lydia S.]

@Eli King

The seller would need to contact the servicer of their loan and confirm it’s assumable.

You would then need to qualify with that servicer plus have the funds to cover the difference between what remains on the loan and the purchase price for the home.

[Eli King]

Quote from @Lydia S.:

@Eli King

The seller would need to contact the servicer of their loan and confirm it’s assumable.

You would then need to qualify with that servicer plus have the funds to cover the difference between what remains on the loan and the purchase price for the home.

Thank you, Lydia. Do you know if most mortgages are assumable or if this is a rare occurrence? Is there any downside to the seller? 

[Eli King]

Quote from @Elias Halvorson:

Hi Eli, 

A few different ways: 

1) You can ask your realtor to put you on a drip campaign for any assumable loans in the areas you desire. 

2) If you are looking at something off-market you can ask your realtor to work with their title company of choice to pull lists of all government loans, in whatever areas you are looking for. This typically costs money, maybe $.02 -.10 per record. It will be a higher cost if you are looking for names, emails, etc. 

Obviously, unless you are a veteran very few of us are going to let a non-veteran assume their VA loan. I say this to emphasize focusing on FHA and USDA mortgages in your search.

Hope this helps! 

 Thanks, Elias. For this instance, I already have a property in mind, I just need to know how to go about seeing if their loan is assumable or not. 

[Lydia S.]

@Eli King

Only FHA, VA and USDA loans may be assumable. Do a little google search of assumable loans and you'll find some answers for pros and cons.

For example investopedia.com has a good summary.

[Bob P.]

Quote from @Eli King:

I'm seeking strategies for assuming someone else's mortgage as a primary residence. What is the best way to explore if this is an option with the seller's lender? Are there any strategies for making this more desirable for the current lender? 

I never contact the seller's lender since there is a Due on Sale clause. The lender will often cause the loan to be called and squelch the deal. There is an approach that is very successful but it requires understanding of how things work. It takes a little training.

[Lydia S.]

Quote from @Bob P.:

Quote from @Eli King:

I'm seeking strategies for assuming someone else's mortgage as a primary residence. What is the best way to explore if this is an option with the seller's lender? Are there any strategies for making this more desirable for the current lender? 

I never contact the seller's lender since there is a Due on Sale clause. The lender will often cause the loan to be called and squelch the deal. There is an approach that is very successful but it requires understanding of how things work. It takes a little training.

 You are referring to seller financing or an REC/wrap, rather than an assumption.  The seller may or may not be willing to accept one as they are not free and clear from their mortgage until the buy-out.

[Jon Puente]

Hey Eli, 

Conventional mortgages (Fannie or Freddie) are not assumable. But government loans such as FHA, VA, and USDA are assumable.

When you find a property you like, find out what type of loan is currently on it.  If its a government loan, you can ask if the seller would be open to an assumption.  All this means is that you take over the existing mortgage with the same lender but using your credit, income, and assets (the same way as you would obtaining a new mortgage). 

However, you will need to cover the equity gap.  For example, if the property is worth 300K and the current mortgage is 200K, you will assume the 200K but need the extra 100K to cover the gap. 

The best strategy to do an assumption is to have your documents in order to you can start the process right away.  Get your paystubs, W2's, bank statements, insurance, etc... lined up.  Assumptions take almost double the time as normal underwriting, so don't make the seller wait even more than they have to.

Great Question! 

[Karen Wanamarta]

@Eli King Did you manage to figure this out? I have a couple assumable properties coming up.