Assumable Loan taking months

[Netra Krishnappa]

Hello all,

I need advice on a bad housing situation I am in.  

In June 2023, a property in Pleasant Hill, CA area came on market for sale at $468K and seller had offered for the buyer to assume his loan (at interest rate of 3.5%) so I made an offer at $475K and Special assessment for balcony remodeling of about $5700. We agreed on an offer of $485K, with a contingency of the loan being assumable and property appraised at $485K.

Since the assumable process was lengthy and would NOT close in August, the seller and his agent wanted me to cover the monthly mortgage payments and made me get into a rental agreement if I wanted to the property or else seller was cancelling the contract, as I was getting the seller’s amazing 3.5% interest rate, I signed the rental agreement to rent till the Loan would go through. Its 2 weeks to end of August but the loan is still in processing and no sign of closing before end of August (loan officer mentioned it assumable loan take several months). When I made the calculations even at the amazing 3.5%, the $$$ will take me 6-8 months to recover and the savings made on the lower interest rates. Also, I am currently living with family so I don’t have to pay rent till the loan goes through and I paying this property a rent for no reason and in fact I am NOT living at as I am worried if the loan falls through I will have to move again.

I feel like I am NOT making the best decision, I am tempted with this amazing interest rate and confused by the bad market situation.

Does it make any financial sense for me to move forward with this offer and pay him rent till the loan closes or should I cancel the contract?

Thank you very much in advance, all advices are appreciated.

[Netra Krishnappa]

Quote from @Joe Homs:

@Netra Krishnappa first of all there are only two types of assumable loans, FHA and VA. Everything else can be taken over subject to financing if you know what you are doing. How much is the loan for? Are you coming in with the difference in price. It sounds like you are working with a RE agent and lender, so I hope they are treating you right.

Good Investing...

Hi Joe,

Apologize, I missed your message.

Its a FHA loan and the loan I will be assuming is around $385K.

It sounded like a great financial investment at the time but with 3 months in its NOT making any sense anymore and the lender/loan service agent is NOT helpful either. And my agent has been only quoting that its a great interest rate when I tell her that all that $$ saved is already lost due to rent and purchase price increase. I paid extra $7500 plus last two months rent of $6000, plus the lender has already charged me $2300 for processing the assumption and mentioned that if we cancel at this point I will lose most of the fee, so it will take me years to gain that money back. And recently I learned that the original loan has PMI which I cannot remove without refinancing and at that point I will lose the low interest rate which was the selling point.

What would you do in this situation?

Regards,

Netra