Most home loans are not assumable, but Veterans Administration (VA) and Federal Housing Administration (FHA) home loans are. It is not necessarily easier to assume a home loan than it is to get your own loan. Most assumable loans require the assumer (the buyer) to qualify, which means you will still need a decent credit score and income. In certain circumstances, assumable loans are a wise investment, such as when the assumed loan has an interest rate lower than the current market rate or when a significant amount of the home loan has already been paid off by the seller.
Step 1
Read over a copy of the seller's mortgage to determine if the loan is indeed assumable and learn the interest rate and terms of the loan. Have a real estate attorney look over the mortgage documents to receive professional advice about whether assuming the loan is a good strategy for your situation.
Step 2
Contact the mortgage company and apply to assume the home loan. Most assumable loans require a new buyer to qualify to assume the loan, which includes going through a credit check and income verification. VA loans that originally closed before March 1, 1998, are assumable without special qualification. After that date, the assumer must apply and qualify with the lender to assume the loan, according to VALoans.com. According to the Mortgage Professor, "FHA loans closed before December 14, 1989 are assumable without qualification." After that date, the buyer must qualify to assume an FHA loan.
Step 3
Negotiate with the sellers the cash price they want you to pay in order to assume their loan. The cash price is a fee you pay up front to the sellers in exchange for them allowing you to assume the loan. The price is not deducted from the balance due on the mortgage. If the sellers have a significant amount of money invested in the home, they typically want to recover some, if not all, of their investment. If the sellers are desperate or are selling in a slow-moving market, they are more likely to negotiate and reduce the cash price.
Step 4
Discuss with the lender the cost of assuming the loan. Ask if a down payment is required to assume the loan and, if so, how much the down payment will be. If you are paying cash to the seller in order to assume the loan, ask the bank if it will consider the money you pay to the seller as part or all of the down payment. Also ask how much closing costs and other loan fees will be.
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