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All About The Assumable Mortgage in 2024

December 25, 2023
Assumable Mortgage: what it is how it works pros and cons in 2024

Assumable Mortgage: What You Need to Know

The Assumable mortgage is the greatest money-saving opportunity homeowners have ever had, but few know about them or understand how they work, we're on a mission to change that with Assumable - the nation’s first platform that lets anyone find and buy homes with Assumable mortgages.

If you felt like you missed the boat on those historically low 2-4% mortgage rates in recent years - an assumable mortgage allows you to KEEP that existing interest rate on a home by assuming the existing mortgage when you purchase. This translates to huge savings compared to today’s rates. You could potentially save thousands a month on your mortgage payment and hundreds of thousands in interest if you assume the existing loan on a home you want to buy.

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So how can you take advantage of this opportunity if you’re a buyer. As a seller, what does it mean for you and your home? And if you’re an agent - what do you need to know about the assumable loans?

I’m going to explain it all - so here we go

What is an Assumable Mortgage?

Assumable loans are government-backed mortgages. Typically FHA, VA, and USDA. Since 1986 all government-backed mortgages are assumable. This means you can assume the existing mortgage on a home and maintain its existing terms and most importantly its existing interest rate. Assumable mortgages were common in the late 1980s during the last inflationary period in the US. Now that we’re in this uncertain time with inflation, higher interest rates, and uncertainty about the economy- the Assumable mortgage is the best opportunity for millions of Americans who have been priced out due to higher rates to achieve their dreams of home ownership.

I founded Assumable because I’m one of those Americans too. Not only have I been priced out of buying a new home due to rising rates - my existing home has an assumable mortgage with a 2.75% interest rate, something I don’t want to give up, and if I do decide to sell, is something that makes my home extremely marketable and valuable to those who want an assumable mortgage and access to my existing low rate.

How Does an Assumable Mortgage Work?

You know that you can assume the existing FHA, VA, or USDA mortgage on a home, but how do you actually complete the assumption?

First - you need a signed purchase agreement for the home between the buyer and seller. Once you have this you can engage our assumable experts who will handle the entire process and ensure as smooth a closing as possible. If you’re an agent or doing a private party deal and do not want help with the assumable process - you’ll be handling all of the paperwork, liaising with the existing mortgage servicer, and staying on top of them to get the assumption accomplished.

Be very mindful of the different requirements and nuances each lender has around assumptions. If you miss any important information, paperwork, or items from their requirements, you run the risk of the assumption failing, something no parties involved want.

The Next step if you work with an Assumable expert is on us - we have buyer and seller sign letters of engagement that allow us to begin gathering the necessary information and process your assumption with the existing lender. The final step is for us to get assumption approval with the existing lender. Then We help coordinate all of the moving parts directly with the entity performing your closing. With that, congratulations your assumption is complete!

Keep in mind that the time it takes to complete an assumption varies lender by lender and the time it takes to close can be protracted if you’re working without an expert who ensures you have all your ducks in a row. 

Right now we’re seeing many assumptions close in 30-45 days! But some lenders' timelines are very long - over 100 days to close depending on a variety of factors. We believe this will change in the future as lenders become more accustomed to the demand and fulfill their requirements

Why Assumable mortgages?

So why look into assumable mortgages? For me, and millions of Americans the answer is all about saving money.

Currently - for a $400,000 mortgage At Today’s rates, your Principal and interest payment alone would be over $2,800. If you can assume an existing mortgage at 3% - your monthly payment is only around $1,650. That difference in monthly payment is the difference between being able to save for retirement, for my children, or for covering the rising costs of today’s economy.  The savings are even more shocking when you look at how much you save in interest

For that 400,000 mortgage at today’s rates you’ll pay over $600k in interest. If you can assume a 3% interest rate - you only pay around $200k in interest

This has huge implications for most Americans - and that’s why an assumable mortgages make sense for buyers. For sellers - it’s about marketability and buyers at the table. You have a huge opportunity to market your home and fetch top dollar with your assumable mortgage.

How can I find homes with Assumable Mortgages?

So now that you know what an assumable mortgage is, how it works, and why you should consider it - how on earth do you find homes with Assumable mortgages? This is why I created Assumable.

When I began my assumable mortgage journey, there was no way for someone to easily find homes for sale with Assumable mortgages - until now. With Assumable, anyone in the United States can freely search for active assumable listings near them. You can search for Assumable mortgage listings near you, just like you’re used to doing on your own. It shows you the estimated interest rate on the home, the estimated payment, and potential interest savings if you go through with a loan assumption.

After you’ve verified the information we provide, we can help you or your agent with your Assumption. If you don’t have an agent - we can connect you with one of our Assumable agent partners who will help guide you through your home assumption.

Do I need help with an Assumable mortgage?

This leads us to one of the most common questions around Assumable mortgages - do you need help with your Assumable mortgage? The simple answer is - probably. You should seek out help from someone who understands the challenges and intricacies of completing a successful mortgage assumption. Most people turn to their agent for this - but not all agents are versed on the requirements and rigor of the assumable mortgage process. This is one of the reasons we are building Assumable to help agents, buyers, and sellers. Without expert help, You could run a high risk of having your assumption fail if you make a mistake, miss important paperwork, or don’t meet all of the lender’s requirements for the assumption. 

We talk to so many people who come to us only AFTER their original assumption failed - only to find out we could have saved them the heartache and stress if our team of assumable experts had been involved from the beginning. So to answer the question of - do you need help for your Assumable mortgage - ultimately, it’s up to you as the buyer or seller or agent. We have free resources available to support you on your assumable mortgage journey.

Seller Benefits of an Assumable Mortgage

The focus of assumable mortgages is on buyers most of the time - but sellers and sellers' agents have a lot to be excited about if they have an Assumable mortgage. If you have a FHA or VA assumable mortgage loan and you’re selling your home you have the most incredible marketing opportunity at hand. But 99.9% are not taking advantage of this. If you properly market your home with the assumable mortgage to the thousands of buyers actively searching - you stand to bring more buyers to the table and get the most value for your home possible. The process of an assumption is also typically less involved than a traditional mortgage; and can close swiftly if you engage the right experts.

At Assumable we provide an avenue for sellers and sellers agents to market their home to those actively searching for homes with assumable mortgages so that they have the best opportunity possible to sell their home for what they want.

VA Assumable Mortgages

I’m going to give you the most important information you need to know about VA assumable mortgages:

  1. VA loans are assumable by anyone, military service is not a requirement. But the caveat here is the VA benefit stays with the home - sellers need to be aware of this. It’s not a common issue for most, and we’re seeing a community of veterans helping veterans emerge because of this amazing benefit
  2. There is typically a .5% assumption fee associated with assuming a VA loan depending on the lender
  3. There are high concentrations of VA assumable homes in areas with a strong military presence. Because of this if you live in an area like that you have more active listings to search that are potentially assumable. An exciting prospect for buyers and for sellers

VA Assumable mortgages are a huge opportunity for buyers to save thousands and sellers to get the most for their homes now and in the future.

Assumable Mortgages in 2024

Now I want to talk about the future of the Assumable mortgage industry. Since we started building Assumable, we’ve seen rapid changes and growth in Assumable mortgages. We believe the Assumable mortgage is the greatest financial well-being opportunity for millions of Americans who have been priced out of home ownership due to rising rates and broader macroeconomic factors. Assumable is on a mission to make the American dream a reality for millions nationwide.

Beyond rising rates, though, we are seeing savvy investors and families with the means to afford the assumable mortgage utilize it as a wealth-building tool - allowing them to save hundreds of thousands on interest and mobilize their liquidity in other ways than paying into a mortgage. 2024 will be the year of the Assumable mortgage. Many will learn about it for the first time and begin considering it, and countless others will work with experts like us at Assumable to help them on their journey of assuming their next home, saving thousands a month and hundreds of thousands of dollars in interest

We will continue to help take the industry forward with our unified approach of bringing agents, buyers, sellers, and lenders together - in 2024 we expect lenders to play a bigger role in assumable mortgages.  We see a huge opportunity for lenders to provide the secondary financing many families may need to complete their assumption. As it stands currently, many lenders will not allow you to bring secondary financing to close to complete the assumption - but that is slowly changing.

Some lenders are starting to allow this type of financing - and if we see it become the standard operating procedure, then assumable mortgages will become even more common and viable for most Americans looking to save money and empower their financial future.

Ryan Carrillo
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