Profile picture for simonehawkins

What does it mean when a seller states the loan is assumable?

  • December 10 2009 - Seffner
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Answers (5)

Profile picture for Diane Brooks
I have had clients that have closed on loans that are assumable as recently as this year.  I would expect that when interest rates begin to rise, the option of assuming a loan will be more attractive.

It really is important to notify the current lender and to have the buyer qualified.  Lenders do check and will take action if the proper steps have not been followed.  

Simone, to answer your original question simply, when a seller states the loan is assumable that means that you can purchase the home by taking over the seller's mortgage.  You would need to provide cash for the difference between the negotiated sales price and the amount of the mortgage.

Interest rates are so attractive right now, you can do better in most cases to get a new mortgage.  Your Realtor will be happy to guide you.

 



 

 

 
  • December 11 2009
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@Hamp! interesting! thanks for responding!
  • December 10 2009
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Rachel,
Some of the recently originated (last 4 years) ARM loans are assumable. They are rare but they do exist. I think, Indy Mac wrote some assumable ARM's. I believe Wells Fargo had some too.They are qualifying assumable loans, so the assuming party would be vetted. Some failry recent FHA loans are also assumable.

simonehawkins
It means you can take over the loan with the Lender's approval. The main problem is that you have to pay the Seller's equity from your pocket, or from a new loan. Say sales price is $250K and Seller owes $150K, which you assume, the $100K has to come from somewhere.
  • December 10 2009
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Profile picture for Valrico REALTOR
some loans are assumable, and it means that you would take over the loan at the amount that is owed, but would still have to qualify for the loan.
  • December 10 2009
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I have yet to hear of any bank that does a loan and lets it be assumable.

Most if not all times, assuming a loan can get you in a lot of trouble. I.E, if the lender finds out someone else took it over, they can "CALL" your loan, and you would have to pay the entire amount immediately.
  • December 10 2009
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