In purchasing a home, you may want to consider
the possibility of assuming an existing mortgage versus obtaining
new financing. You will assume the term, rate and possibly the balance
of the existing mortgage.
There are four basic types of assumable
mortgages: conventional qualifying, conventional non-qualifying,
FHA and VA. Your Realtor® will assist in contacting the lending
institution to determine the mortgage type and assumability.
Conventional qualifying mortgages require
a complete credit package on the borrowers. Employment and/or credit
history, with cash to close are normally verified in writing. An
appraisal may or may not be necessary depending on the requirements
of the lender. An application fee may be necessary to cover the
direct costs the lending institution incurs for appraisal and credit
reporting fees. In addition, an assumption fee may be charged to
cover internal processing costs. This quote should be obtained from
the lender directly. Only conventional mortgages written prior to
1973 are assumable without qualification. Fees are the exclusive
right of the lender.
To stimulate interest and ease in home ownership,
the Federal Housing Administration developed insured mortgages.
FHA guarantees or insures repayment to the servicing lending institution,
therefore opening a new market sector. FHA loans are assumable without
qualification if the original recording date was prior to December
1, 1986. FHA loans made on or after December 1, 1986 may be assumed
with credit qualification and acceptability by the Department of
Housing and Urban Development.
The VA loan created by the Department of
Veteran's Affairs benefits the veteran in purchasing a home. VA
loans are immediately due and payable upon transfer of property
unless the acceptability of the assumption of the loan is approved
by the Department of Veteran's Affairs or its authorized agent.
Overall, all types of assumptions come under
the requirements of the servicing agent or lending institution.
Compare the benefits and costs to determine if the existing loan
would be most advantageous to you. Remember, your Realtor® will
be happy in assisting you with your mortgage options.
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