Mortgage Assumption Guide

Can You Assume a Mortgage?

Assuming a mortgage means taking over the remaining loan balance and its existing terms from the current borrower. This can be a smart option for buyers looking to avoid current interest rates or reduce upfront costs. But not all mortgages are assumable, and there are strict legal requirements involved.

Types of Assumable Mortgages

• FHA Loans: Generally assumable with lender approval and credit qualification.
• VA Loans: Can be assumed by both veterans and non-veterans with VA and lender approval.
• Conventional Loans: Most are not assumable unless specified in the original contract.

Due-on-Sale Clause

A due-on-sale clause is a condition in many mortgage contracts that requires full loan repayment when the property is transferred. This clause can block the assumption of the mortgage unless the lender explicitly waives it.

Steps to Assume a Mortgage

1. Check if the mortgage is assumable (read the loan agreement or contact the lender).
2. Get lender approval and submit financial qualifications.
3. Hire a real estate attorney to prepare the proper assumption paperwork.
4. Ensure title transfer and new insurance policy are in place.

Benefits of Assuming a Mortgage

• Keep a lower interest rate from the original borrower
• Save on closing costs
• Avoid traditional mortgage qualification if lender permits

Risks and Considerations

Be aware of potential risks like balloon payments, back taxes, or issues with the due-on-sale clause. Always consult with a real estate professional or attorney before proceeding with a mortgage assumption.

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