Assumable Mortgage

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Assumable Mortgages in San Diego

Assumable Loan Listings San Diego

From 1031 exchanges to assumable mortgages, search San Diego properties for sale with assumption loans.

In a rising interest rate environment, an assumable mortgage could be an attractive choice. Landing a locked-in interest rate that is lower than prevailing rates might drastically lower the total amount you pay on the mortgage payment each month.

With an assumable mortgage, you’ll agree to take over and pay down the balance of the Seller’s home loan in accordance with the original terms, after qualifying and being approved. Buyers also choose an assumable mortgage for other reasons too.

Here’s what you need to consider before deciding if an assumable mortgage is right for you.


Key Takeaways —

• Assuming a mortgage means the Seller signs the balance of their loan over to you as the Buyer, then you become responsible for the remaining payments.

• Most conventional mortgages are not assumable, but many government-backed loans (FHA, VA, USDA) are.

• The Seller's lender must approve you assuming the mortgage, and at closing, you must compensate the Seller for the amount they've already paid off.

San Diego Assumable Mortgage Listings

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What Are Assumable Mortgages?

An assumable mortgage is a type of home loan that allows a homebuyer to take over the existing mortgage terms from the Seller. Many government-backed loans, such as FHA and VA loans, are eligible for assumption, and millions of these mortgages are available.

Why Assume a Mortgage?

When interest rates on mortgages are high, assuming a mortgage with a rate as low as 2% allows you to save up to thousands of dollars monthly on your mortgage payment. A low-rate assumable mortgage could be the key to purchasing your next house at a more affordable price.

When Can You Assume a Mortgage?

You can assume a mortgage when the existing loan terms allow for assumption. The process involves verifying the mortgage’s assumability, qualifying for the assumption through a credit check and financial assessment, obtaining approval from the Seller’s lender, and signing an Assumption Agreement if qualified.

Closing day marks the completion of the loan assumption and your home purchase transaction, when you take over the mortgage and the Seller is released from their loan obligations. Specific requirements and conditions vary, so check with the Seller’s lender and fully review all terms of the existing mortgage beforehand.

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Are Assumable Mortgages Still Available?

Yes, assumable mortgages are still available, but they are not as common as they once were in the past. An assumable mortgage allows you to take over the current mortgage at its existing interest rate and terms. This can be advantageous if the present mortgage has a lower interest rate than prevailing mortgage rates.

What Types of Mortgages are Assumable?

Assumption clauses are most commonly found in certain government-backed loans, such as FHA and VA home loans. FHA refers to the Federal Housing Administration, while VA means the Department of Veterans Affairs.

These types of government-backed loans for home mortgage financing can contain an assumption clause that allows a qualified Buyer to take over the existing mortgage with its terms, including the interest rate.

It’s important to note that not all mortgages are assumable, and conventional mortgages typically do not offer this option. To assume a mortgage, one must verify the specific terms of the existing loan, qualify for the assumption, obtain approval from the lender, and complete the process through a formal closing

What Happens When You Assume a Mortgage?

When you assume a mortgage, you take over an existing home loan from the Seller, inheriting its full repayment terms, including the interest rate and repayment schedule. To assume a mortgage, you must first verify if the mortgage is assumable and then qualify for the assumption by meeting the Lender’s criteria. Once approved, you’ll review and sign an assumption agreement.

Closing is conducted, officially transferring the mortgage to you. The Seller is released from their mortgage obligations, and you become responsible for the remaining loan balance. Assuming a mortgage can be advantageous if the existing interest rate is lower than current market rates, potentially saving you money on financing costs.

Homes for Sale with Assumable Mortgages

From 1031 exchanges to assumable mortgages, search San Diego properties for sale with assumption loans.

Do You Have to Qualify for an Assumable Mortgage?

Yes, qualifying for an assumable mortgage is an essential step in the process. To assume a mortgage, you must first verify if the mortgage is assumable and then qualify for the assumption by meeting the Lender’s criteria.
When a mortgage is assumable, you need to meet the Sellers’ lender’s criteria for creditworthiness & financial stability. This involves undergoing a credit check and demonstrating the ability to repay the remaining loan. The lender will evaluate your financial situation to ensure you’re a suitable candidate to take over the mortgage.
You must meet their qualification requirements for the Seller’s lender to approve your mortgage assumption. Without the approval, an assumable mortgage will not proceed. Therefore, even though assumable mortgages offer the potential to take advantage of favorable existing terms, you must still meet the Sellers’ lender’s approval standards to assume the mortgage successfully.

Do Assumable Mortgages Differ from Conventional Loans?

Assumable mortgages differ from conventional loans in that the Buyer does not need to originate a new mortgage in a loan assumption. This means you can buy the house and take over the Seller’s mortgage terms including the balance and interest rate, subject to approval.
During the loan assumption, a Seller transfers all terms and conditions of the mortgage to a Buyer. The Buyer takes on the Seller’s remaining debt instead of taking out a new mortgage of their own.

Can I Assume Any Home Mortgage Loan?

It’s important to note that not all mortgages are assumable, and the Sellers’ Lender’s full approval is required for the assumption to take place. Additionally, assumable mortgages are most prevalent with certain types of government-backed loans, such as FHA and VA loans. Conventional loans may vary on assumability.

Tranferrable Mortgage Homes for Sale

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Can You Assume a Conventional Mortgage?

Assuming a conventional mortgage is less common compared to government-backed loans like FHA or VA mortgages. Many conventional mortgages often have a “due-on-sale” clause, which means the full loan balance becomes due if the property ownership changes.
However, some conventional mortgages might be assumable with the Sellers’ lender’s approval, depending on the loan agreement and the specific policies of that lending institution. It’s crucial to review the terms of the existing mortgage and consult with the Sellers’ lender to determine whether a loan assumption is allowed and under what conditions. If permitted, the assumption process would involve qualifying for the assumable mortgage, obtaining lender approval, and completing the transfer through a formal closing.

How Do You Take Over an Assumable Mortgage?

First, you need to verify that the existing mortgage is indeed assumable. Once confirmed, you must qualify for the mortgage assumption by meeting the Sellers’ lender’s criteria for creditworthiness and financial stability. Obtaining lender approval is essential, and this often involves a credit check and full financial assessment.

After qualifying, you’ll review and sign an Assumption Agreement which outlines all terms and conditions of the loan  assumption. The process concludes with a formal closing, where you’ll officially take over the mortgage and the Seller is released from their loan obligations. It’s important to note that the specific requirements and conditions for assuming a mortgage can vary based on the type of loan and the Sellers’ lender’s policies.

How Do I Know if A Buyer Can Assume My Mortgage?

Check the terms of your existing mortgage to determine if it is assumable, as not all mortgages offer this option. The Closing Disclosure/Settlement Statement you received at closing, back when you bought the house, specifies whether your mortgage is assumable and how it would be transferred to another person, if so. There’s a section on the form with a checkbox for loan assumption, if applicable, which is the starting point to fully assess loan terms & viability.
Once confirmed, the Buyer must qualify for the assumption by meeting your lender’s criteria, which typically involves a credit check and full financial assessment. Consult with your lender to understand their specific requirements for mortgage assumption.

If your current mortgage is assumable and the Buyer meets all qualifications, the next step is obtaining lender approval for the assumption. This process may require you to submit an application and relevant financial information. After approval, you’ll review and sign an Assumption Agreement then closing takes place, officially transferring the mortgage to the new Buyer. Ask your lender for details and follow their procedures to ensure a smooth and successful transfer.

Transferrable Mortgage Listings San Diego

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Is Assuming a Mortgage a Wise Idea?

Whether an assumable mortgage is a wise idea largely depends on your situation. Consider factors like the terms of the existing mortgage, current interest rates, and your budget. Assuming a mortgage can be beneficial if the Seller’s existing interest rate is lower than prevailing market rates, potentially saving you money on loan financing costs. 

Carefully review the terms of an assumable mortgage. Consider any associated fees and assess the overall financial implications. Additionally, you must qualify for the assumption and obtain lender approval, which can involve a very thorough financial assessment. Weigh the potential risks against the rewards and potential cost-savings. Consulting with your own financial professionals to make an informed decision based on your personal circumstances.

How Much Does It Cost to Assume a Mortgage?

The costs associated with an assumable mortgage are often similar to the fees for taking out a new mortgage. You may be responsible for REALTOR® commissions, a down payment, closing costs and an inspection fee. Plus, you will be responsible for an assumption fee that is specific to this type of transaction. Still, the costs could be worth it if the assumable mortgage comes with a lower interest rate than you’d be able to get with a new loan on your own.

Do You Need a Down Payment for an Assumable Mortgage?

You’ll need to make a down payment, but the amount depends on how much equity the Seller has. If the Seller has a lot of home equity, or if the value of the house is far greater than the mortgage balance, you could have to come up with a hefty down payment to compensate them. You’d either have to pay cash for the difference or find a lender willing to issue a second mortgage to you. It can be helpful to target assumable mortgages on properties with a high loan balance, so your down payment amount needed to compensate their equity is smaller.

Assumable Loan Listings San Diego

From 1031 exchanges to assumable mortgages, search San Diego properties for sale with assumption loans.

The Bottom Line on Assumable Mortgages

If you’re interested in assumable mortgages, we recommend checking with lenders to ask about their specific home loans and whether they offer assumable options. Keep in mind that availability and terms of assumable mortgages can vary.
Whatever you decide, be sure to have a real estate attorney carefully look over any Agreements or Contracts before you sign. Also consult with your own financial professionals to make an informed decision based on your personal scenario.
Reach out to us at 858.880.0195 or email portia.green@compass.com to learn more about home loan options that can help you save money on your mortgage.
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About The Author
Portia Green, REALTOR®

Portia’s clients all have a similar story. Most likely, you met her huddled around a tablet at the dinner table yet she feels like a friend. Her personable nature and easy going approach attract Sellers and Buyers alike, in what can be a stressful and emotionally charged event. A talented REALTOR® with 16 years experience, Portia is just as excited about real estate today as she was with her first transaction. She remains ever-committed to helping her clients find their place in the world and helping busy people navigate this crazy real estate market like a pro.