what types of loans are assumable 
some of the most popular types of mortgages are assumable if you are a buyer who wishes to assume a mortgage from a seller you must meet specific requirements and receive approval from the agency sponsoring the mortgage fha loans are assumable when both transacting parties meet the requirements for the assumption for instance the property must be used by the seller as their primary residence if you were the buyer you must first verify that the fha loan is assumable and then apply as you would for an individual fha loan the seller s lender will verify that you meet the qualifications including being creditworthy if approved you will then assume the mortgage however until the seller is released from the loan they are still responsible for it 2the department of veterans affairs offers mortgages to qualified military members and spouses of military members however to assume a va loan you need not be a member of the military to qualify however the lender and the regional va loan office will need to approve you for the loan assumption and most often buyers who assume va loans are military members for loans initiated before march 1 1988 buyers may freely assume the va loan in other words you would not need the approval of the va or the lender to assume the mortgage 3usda loans are offered to buyers of rural properties they require no down payment and often have low interest rates to assume a usda loan you must meet the standard qualifications such as meeting credit and income requirements and receive approval from the usda to transfer title you may assume the existing rate of interest and loan terms or new rates and terms 4 even if you meet all requirements and receive approval the mortgage cannot be assumed if the seller is delinquent on payments conventional loans backed by fannie mae and freddie mac are generally not assumable though exceptions may be allowed for adjustable rate mortgages upfront fees on fannie mae and freddie mac home loans changed in may 2023 fees were increased for homebuyers with higher credit scores such as 740 or higher while they were decreased for homebuyers with lower credit scores such as those below 640 another change your down payment will influence what your fee is the higher your down payment the lower your fees though it will still depend on your credit score fannie mae provides the loan level price adjustments on its website 4advantages and disadvantages of assumable mortgagesrate on the mortgage may be lower than current market ratesmay not need to apply for a new mortgageif seller s home equity is low there are less out of pocket costs for the buyermay need a substantial down payment when the seller s home equity is highlenders may not cooperate when a second mortgage is neededwith two mortgages the risk of default increasesthe advantages of acquiring an assumable mortgage in a high interest rate environment are limited to the amount of existing mortgage balance on the loan or the home equity for example if you are purchasing a home for 250 000 and the seller s assumable mortgage only has a balance of 110 000 you will need to make a down payment of 140 000 to cover the difference or you will need a separate mortgage to secure the additional funds a disadvantage is when the home s purchase price exceeds the mortgage balance by a significant amount requiring you to obtain a new mortgage depending on your credit profile and current rates the interest rate may be considerably higher than the assumed loan usually you will take out a second mortgage on the existing mortgage balance if the seller s home equity is high you may have to take out the second loan with a different lender from the seller s lender which could pose a problem if both lenders do not cooperate with one another also having two loans increases the risk of default especially when one has a higher interest rate if the seller s home equity is low however the assumable mortgage may be an attractive acquisition if the value of the home is 250 000 and the assumable mortgage balance is 210 000 you only need to put up 40 000 if you have this amount in cash you can pay the seller directly without having to secure another credit line assumable mortgage transfer approvalthe final decision over whether an assumable mortgage can be transferred is not left to the buyer and seller the lender of the original mortgage must approve the mortgage assumption before the deal can be signed off on by either party the homebuyer must apply for the assumable loan and meet the lender s requirements such as having sufficient assets and being creditworthy a seller is still responsible for any debt payments if the mortgage is assumed by a third party unless the lender approves a release request releasing the seller of all liabilities from the loan if approved the title of the property is transferred to the buyer who makes the required monthly repayments to the bank if the transfer is not approved by the lender the seller must find another buyer that is willing to assume the mortgage and has good credit a mortgage that has been assumed by a third party does not mean that the seller is relieved of the debt payment the seller may be held liable for any defaults which in turn could affect their credit rating to avoid this the seller must release their liability in writing at the time of assumption and the lender must approve the release request releasing the seller of all liabilities from the loan 