FAQ’s
Let’s Answer Your Questions
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FHA Loans - These are insured by the Federal Housing Administration and are often assumable with lender approval.
VA Loans - Guaranteed by the Department of Veterans Affairs, these loans are typically assumable by both veterans and non-veterans, though non-veterans might need to meet specific criteria.
USDA Loans - Loans backed by the United States Department of Agriculture can also be assumable, primarily for properties in rural areas.
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When interest rates on mortgages are high, assuming a mortgage with a rate as low as 2% allows buyers to save up to thousands monthly compared to buying a home with a traditional mortgage at today’s average rates of 7%. A low-rate assumable mortgage could be the key to finding your dream home at an affordable price.
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Review Loan Terms: The buyer and seller should review the current loan terms to ensure they are favorable and that the loan is assumable.
Contact the Lender: The seller should inform the lender of their intention to sell and have the buyer assume the loan. The lender will provide the necessary forms and requirements.
Application Process: The buyer applies to the lender for approval, including financial documentation.
Approval and Transfer: Once the lender approves the buyer, the loan is officially transferred, and the buyer starts making payments.
Finalizing the Sale: Any remaining equity payments or adjustments are made, and the sale is finalized.
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Qualifying for an assumable loan involves several steps and criteria like those for obtaining a new mortgage. The buyer must demonstrate their financial ability to take on the existing mortgage and meet the lender's requirements.
Credit Score – The higher the score, the more likely to get an approval. This is a consideration in every loan process.
Income Verification - The buyer must provide proof of stable and sufficient income to cover the mortgage payments.
Debt-to-Income Ratio (DTI) - Lenders will assess the buyer's DTI ratio, which compares monthly debt payments to gross monthly income. Typically, a DTI ratio below 43% is preferred, though some lenders may have more stringent requirements.
Employment History - A stable employment history, usually with the same employer or within the same industry for at least two years, is often required.
Assets and Reserves - The buyer may need to demonstrate that they have sufficient savings or liquid assets to cover closing costs, down payment (if applicable), and a few months of mortgage payments as reserves.