@Kozmo wrote:
I looked at a house a few weeks back before I bid on my current choice and the realtor said they had an assumable mortgage with FHA.
They just refi'ed and had a damn good rate. She said all you have to do is apply with Wells Fargo (the lender) and meet their requirements and we could take on the loan.
Now, given that rates are so low, and bound to go up soon, how do I go about making my soon to be mortgage an assumable one? It would make selling it that much easier down the road, no?
I know they were popular way back in the day. Any chance of a comeback?
Assumable mortgages are very rare now. Are you going with an FHA or VA loan? These are more likely to be assumable. However, just because a loan is assumable doesn't mean that it can be automatically transferred to another borrower. The lender still needs to approve the assumption, and if the buyer's credit profile does not meet the lender's criteria, then the transaction can be denied.
There's other potential complications. I've heard (but not confirmed) that if there isn't an explicit release of liabilty for the loan on assumption, then if the buyer fails to make payments then the seller could be potentially held responsible for payment of the loan. Also, the buyer can only assume the remaining balance of the loan. So, if you start off with a $200,000 mortgage, pay off $75,000, and then sell your home for $300,000, the buyer can only assume the remaining $125,000. He/she would either have to come up with the remaining $175,000 to cover the purchase of the home, which might entail getting another mortgage. This would likely get complicated, as the lenders would probably get into a tiff about which loan is going to be subordinate to the other.
