Finding a home with an assumable mortgage is tricky and will require
in-depth research. However, once you have located an assumable property, the
benefits are endless. Those interested in assuming a home loan should work with
a real estate agent or private investors. Real estate investors are more ideal
because they are in the business of buying homes cheap, and selling them for a
profit.
Thus, they are likely to have information on finding an assumable
mortgage. Of course, if you are also in the market of assuming a mortgage for
investment purposes, a real estate investor may not be as willing to offer
assistance. On occasion a real estate agent may receive a property with an
assumable mortgage. Those interested in purchasing a property should inform
their agent of their interest in assuming a home. Only two types of mortgages
that are assumable – adjustable rate and FHA loans.
Once an assumable property has been located, the buyer interested in the
property should obtain and review loan papers. These papers will indicate the
original loan amount, payment, and terms. The next step is to contact the
lending institution and request an assumable loan package. The buyer will have
to meet certain requirements prior to assuming a loan. Still, assumptions may
be easier than applying for a new mortgage. Some lending institutions require
that those assuming the home mortgage pay a minimum down payment. In most
cases, the new mortgage holder will only need to prove income and have
acceptable credit.
Assuming a mortgage is a more attractive feature when a
buyer has a substantial amount of cash on hand. The new buyer will generally
have to offer the seller the difference between the loan amount and the selling
amount. For example, if a home is selling for $100,000 and the payoff for the
loan is $80,000, the person assuming the loan will pay the seller $20,000 in
equity, and continue to payoff the remaining balance of $80,000. There are
instances when a person may assume a loan without paying equity to a seller.
This situation is more common when the original home owner is a motivated
seller or deceased.