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Founded in 1976, Bankrate has a long track record of helping people make smart financial choices. We’ve maintained this reputation for over four decades by demystifying the financial decision-making process and giving people confidence in which actions to take next. Bankrate follows a strict , so you can trust that we’re putting your interests first. All of our content is authored by and edited by , who ensure everything we publish is objective, accurate and trustworthy. Our mortgage reporters and editors focus on the points consumers care about most — the latest rates, the best lenders, navigating the homebuying process, refinancing your mortgage and more — so you can feel confident when you make decisions as a homebuyer and a homeowner. Bankrate logo Editorial integrity
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You have money questions. Bankrate has answers. Our experts have been helping you master your money for over four decades. We continually strive to provide consumers with the expert advice and tools needed to succeed throughout life’s financial journey. Bankrate follows a strict , so you can trust that our content is honest and accurate. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. The content created by our editorial staff is objective, factual, and not influenced by our advertisers. We’re transparent about how we are able to bring quality content, competitive rates, and useful tools to you by explaining how we make money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and, services, or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range can also impact how and where products appear on this site. While we strive to provide a wide range offers, Bankrate does not include information about every financial or credit product or service. What is an assumable mortgage
What kinds of mortgages are assumable
In theory, any type of home loan could have an assumable mortgage clause. However, only three types of loans typically have this feature: – If you want to assume an FHA loan, you’ll need to meet standard FHA loan requirements. These include being able to put down a minimum of 3.5 percent with a credit score of at least 580. – To assume a USDA loan, you typically need a minimum credit score of 620. You also have to meet income limits and location requirements. Note that a USDA loan is typically assumed with a new rate and terms, but in some cases, like between families, it can be assumed with the same rate and terms without needing to meet eligibility requirements. – To assume a VA loan, the lender has to approve it, usually by first evaluating your creditworthiness as a borrower. You don’t necessarily have to be a member of the military or a veteran to assume a VA loan. While there isn’t a minimum credit score, a lender will typically look for a 620 and above. You’ll also still have to pay the funding fee of 0.5 percent. Conventional loans typically are not assumable. Look for an assumption clause
To know whether your mortgage is assumable, look for an assumption clause in your mortgage contract. This provision is what allows you to transfer your mortgage to someone else. Remember that if assumption is allowed, the mortgage lender will typically hold the new borrower to the loan’s eligibility requirements. How do assumable mortgages work
When you assume a mortgage, the current borrower signs the balance of their loan over to you, and you become responsible for the remaining payments. That means the mortgage will have the same terms the previous homeowner had, including the same interest rate and monthly payments. If you assume the mortgage, you’ll need to pay off whatever equity the seller has, as well, either in your or by using another loan. Assuming a mortgage after death or divorce
Assuming a mortgage doesn’t just have to happen through a sale, though. A family member can assume an existing mortgage from a relative who has died, for instance, or, if one person is awarded sole ownership of a property in , that person can assume the full existing mortgage themselves. In both cases, assumption is allowed even if the contract doesn’t include an assumption clause. In an inheritance scenario, the new borrower does not need to qualify for the loan in order to assume it. Pros and cons of assumable mortgages
Pros
Your home can be more desirable to buyers You typically don’t need an appraisal Cons
You’re limited to the current lender You could need to make a large down payment You could still be responsible for the debt How to assume a mortgage
Confirm that the loan is assumable Prepare for the costs Submit your application – The assumption process could look different from lender to lender, but in general, you’ll need to fill out an application and other forms and provide identification. Close and sign liability release Learn more
SHARE: Zach Wichter is a former mortgage reporter at Bankrate. He previously worked on the Business desk at The New York Times where he won a Loeb Award for breaking news, and covered aviation for The Points Guy. Suzanne De Vita is the mortgage editor for Bankrate, focusing on mortgage and real estate topics for homebuyers, homeowners, investors and renters. Related Articles