The Latest Real Estate Trend: Assumable Loans

Prior to 2023, homeowners were doing well taking advantage of their home's equity and selling at astounding prices. At that time, interest rates were below 3% and people were chomping at the bit to buy a home, so they could secure low mortgage payments for 10-30 years. That period of time quickly, and abruptly, came to an end mid-year of 2022. Since then, many markets have seen homes sitting on the market longer, and more homeowners, frustrated at how long the sale process was taking, reluctantly took their homes off the market.

Here we are though, getting closer to the end of 2023, and the question most agents are asking now: Who has a listing with an assumable loan? As the phrase suggests, assumable loans are ones where the lender will allow another buyer/borrower to assume the current loan on the home, as long as they qualify. With such a large percentage of homeowners buying their home, or refinancing their mortgage (when rates were below 3-4%), the idea of assuming a loan with an attractive low interest rate is becoming more popular for home buyers.

However, the assumable loan option isn't something every homeowner can offer. Only some mortgages qualify, and there are stipulations. Some key points to consider about assumable loans:

1. Only VA and FHA loans are assumable. Contrary to what some people may have heard, a VA loan CAN BE assumed by a non-veteran buyer. As a veteran, there are pros and cons to having someone assume your VA loan: one con being the veteran's eligibility stays with the home.
2. Loan assumption fine print varies by lender.  Verify loan assumption eligibility by calling your lender first.
3. Loan assumptions can take anywhere from 45-120 days to process, on average.
4. The buyer assuming the loan would, in most cases, need to come up with the difference (in cash) between the loan being assumed and the sale price of the home. 

If you'd like to learn more about loan assumptions, reach out to me and I can answer any other questions!