An assumable mortgage allows for the conveyance of the terms and balance of an existing mortgage to the purchaser of a financed property provided that the assuming party is qualified under lender or guarantor guidelines.
What type of loans are assumable?
Not all mortgages in the U.S. are assumable. In fact, approximately 18% of total mortgages are. Most of the mortgages that are assumable are issued, guaranteed or insured through U.S. Government agencies including the Federal Housing Administration (FHA), Veterans Administration (VA), and the US Department of Agriculture through their rural housing service program. There are also a smaller amount of conventional mortgages in the market that are assumabled under varying situations and if a lender or guarantor of a mortgage may choose to allow the mortgage to be assumed.
How do I find homes with assumable mortgages?
Zumption.com provides a search function, found here which you can use to easily search for homes with assumable mortages by either city/state or zip code.
What does "In Z Money" mean?
Properties that are assumable, and that at today's interest rate have a positive assumption are designated by the "In Z Money" designation. This means that when assumed both the buyer and the seller can realize an added benefit from the property.
What is the Zumption Savings Box I keep seeing on the listing pages?
The Zumption Savings Box appears on properties that are considered "In Z Money". The box contains the Zumption values, including the Mortgage Assumption Value, the Monthly Interest Savings, Life of Loan Savings, and more values showing the value of assuming the mortgage on a specific home. For a more detailed explanation of the Zumption Savings Box, how we get our Zumption values, and what these values mean to the listing click here.
What does the Zumption “Mortgage Assumption Value” mean?
The Mortgage Assumption Value (MAV) calculated by Zumption is the mathematical value that is created if a buyer of a home assumes the existing loan financing the property instead of taking out a new mortgage at today’s interest rate for the same existing principal balance of the loan. To see today's Natioanl MAV, Click here.
How can BOTH buyers and sellers get value out of a mortgage assumption, It seems counterintuitive to me ?
In most transactions what the buyer gives up, the seller receives and vice versa. This isn’t the case in a mortgage assumption. The transaction isn’t about buyer vs. seller, the transaction is about the buyer and seller exercising their right to let the mortgage be assumed in lieu of, and at the expense of a newly originated, higher-cost loan. Both buyer and seller can and should split this value in some manner.
Who benefits more? The buyer or the seller?
On an in-the-money mortgage assumption there is always an identifiable value created. As in any negotiated real estate transaction, the percentage of the benefit that accrues to the buyer and what accrues to the seller is the result of the negotiated transaction price. To read about a study done in the 1980’s after the last major assumption wave, that discusses what percentage went to buyers and sellers, See our resource center.
Why have I heard so little about assumable mortgages up to this point?
The U.S. mortgage market has experienced a bull market of historic proportions over the past 32 years with interest rates falling from 18 3/8% in 1981 to a recent historical low of 3 1/8% before beginning to move higher earlier this year. With mortgage rates having generally fallen for the past three decades there has been little if any value in assuming mortgages. As mortgage interest rates begin to return to more traditional levels, assumption will become an increasingly more popular and talked about topic.
How many mortgages are assumable in the United States?
As of 2014 it is estimated that 18% of all mortgages in the United States are assumable FHA or VA loans, meaning that approximately one out of every six mortgages is assumable.
What is the loan to value (LTV) on assumption ratio and why is it significant?
The loan to value ratio is important in an assumption just as it is in a traditional mortgage financing. It represents the percentage of the assumed loan relative to the value of the home you are purchasing, with the remainder representing your down payment and potentially secondary financing if necessary. This may present different opportunities for different buyers depending on how much money they have available for a down payment, whether the property is being purchased as an investment vs. owner occupied, and potential scenarios for secondary financing (if needed).
Why is my home on Zumption?
Zumption compiles listing data from multiple sources for analysis and listing on our site. If you find your home for sale on Zumption, it is likely that one of our sources has your home listed for sale. Once we have received this data we then check whether an assumable mortgage is present on the home, and if so the house is analyzed for posting on Zumption.
Why is my mortgage rate on Zumption incorrect?
At Zumption we value the privacy of homeowners, and as such we use inferred mortgage rates for posting on listings. These inferred rates allow us to accurately, and conservatively, analyze your mortgage, but if you feel that it would be more beneficial to use your actual rate, please feel free to contact us here and we will gladly rework the numbers and mortgage rate on site.
What if I don't want my home listed on Zumption?
We understand that some home sellers may not want their property listed on Zumption. If this is the case, please feel free to contact us . Please include the link to your home, your name and full address. For verification purposes we also request you include a copy of a valid government photo ID and a utility bill for the listed address from within the past 6 months.
How do I make my assumable mortgage more visible?
The first step is listing your property on Zumption! If your property is already listed on our site, feel free to get in touch with us and let us know you are open to a buyer assuming your mortgage. We will change your property from "Assumable" to "Open to Assumption" so buyer's know you are aware of the benefits of Assumption and are willing to have your mortgage assumed. Contact Us
I know that my house is financed with an assumable loan and financed at a mortgage rate lower than rates currently available in the market. What does that mean for me now that I want to sell my home?
This means that you have additional value in your home. This value may be reflected in your ability to sell your home, the ability for you to sell it faster, and the ability for you to sell it at a higher price.
When should I tell my realtor that I have an assumable mortgage?
As soon as you start to interview realtors, you should discuss assumability immediately so that you know that your realtor understands how it works, how to identify the value, and how to maximize the feature for you, the seller.
If I allow my mortgage to be assumed, am I the seller of the home released from liability?
Yes. Providing that proper procedures are followed and the buyer qualifies under the guarantor or insurer of the mortgage.
How can I find out if my mortgage is assumable?
Approximately 18% of all mortgages in the U.S. are assumable. If you are uncertain whether your mortgage is assumable, contact us here and we will get back to you within 2 business days to let you know if your mortgage is assumable!
I have found a home listed on Zumption that I am interested in buying and that offers value through assumption. How should I proceed?
If you are represented by a real estate agent, you should inform them that you believe the home is assumable and that they should communicate this to sellers agent, or if it a for-sale-by-owner, the seller directly. You can also Contact Us with the property you are interested in and we can help you find a realtor experienced in mortgage assumption.
Do I have to qualify to take over an assumable mortgage?
Yes. Under current directives from the Department of Housing and Urban Development (HUD) mortgages issued since 1989, in order to provide for assumption where the original borrower is released from liability, require that the assumptor (the person assuming the loan) qualify under current HUD (FHA and VA) guidelines.
Does an assumable mortgage have to be "In the Money", at a lower interest rate than currently available rates, for the assumption to make sense?
No. Even mortgages that have somewhat higher interest rates may represent overall cost savings due to lower closing costs, the lack of mortgage commitment fees, lower or no appraisal and title fees, and mortgage insurance savings.
What if I need additional funds to close the transaction besides my down payment?
In some cases, an assumptor may not have the ability to fund the difference between the value of the assumed loan and the sales price, and may need to borrow additional funds in addition to their down payment. This is usually accomplished through second lien financing arrangements such as home equity lines of credit (HELOCs) and traditional second mortgage sources.
Can I purchase a home and assume the mortgage if I am buying the property as an investment?
Generally, No. FHA loans will allow the assumption of an investment property only when it is a multi-family unit (up to 4 units), one of which will be occupied by the assumptor. VA loans only allow assumption with the intention of using the property as a primary residence, so it is not permissible to assume the property for investment purposes.
If the property is assumed does is mean that that value is created?
Yes. Mathematically, through simply the difference in the payments between the lower rate assumed mortgage and the higher rate current mortgage, there is a clear identifiable creation of value in any in-the-money transaction. In fact, for every in-the-money assumable home that sells without being assumed, this represents the loss of that potential value to both buyer and seller.
Do I need to find a mortgage broker to complete an assumption?
NO. Mortgage assumption is a service provided by mortgage servicers. If you are a home seller, you should contact your servicer to request an assumption package. If you are a buyer, you or your realtor should have the seller request an assumption package to begin the process.
VA Loan FAQ
Can a non-veteran assume a home loan guaranteed by the VA?
Yes. A non-veteran buyer who qualifies under the applicable guidelines may assume a loan guaranteed by the VA.
Can a veteran seller get another VA loan once their original VA loan is assumed?
Possibly. For a veteran to be able to get a new VA Loan upon the assumption of their current VA Loan, the buyer will need to also be a Veteran, and have a VA entitlement. The buyer and seller would submit a Substitution of Entitlement (SOE) request, which would allow the buyers entitlement to replace the seller’s entitlement for the loan. Once substituted the seller would request a restoration of their entitlement, and be able to apply for a new VA Loan. Should a non-veteran assume the seller’s VA Loan, the seller’s entitlement would not be restored until the original loan was paid off in full.
Are there any funding fees associated with assuming a VA loan?
Yes. The VA assumption regulations state that a funding fee of .5% of the current loan balance is required at closing to assume the mortgage.
Is owner occupancy required to assume a VA loan?
Yes. In the case of a Substitution of Entitlement, the buyer must certify that they will occupy the home. For non-veterans, the original terms of the loan require the property be occupied as the primary residence.
If a VA loan is assumed, is the seller released from liability?
Part of the VA loan assumption process is qualification of the buyer. Should the buyer qualify to assume the seller’s mortgage the seller can apply to be released from further liability upon closing of the real estate transaction. If a VA mortgage is assumed without approval the seller is not released from liability, but retroactive approval may be granted under certain conditions.
Do VA loans have monthly mortgage insurance (MI) premiums?
No. There are no monthly mortgage insurance premiums on a VA loan.
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