FUN (or not so fun) FACTS
The buyer cannot use their own lender, unfortunately. The seller’s current mortgage servicer will continue servicing the loan and will not change the current loan balance. That is why a large down payment is required to cover the difference between the current loan amount and the proposed new sales price. In some situations, a buyer can add a secondary loan through said mortgage servicer to cover the difference they would have to make up in cash, and depending on what that amount is and what interest rate could be obtained for this secondary loan, it still could be a more financially attractive situation versus purchasing a non-assumable mortgage resale home.
As the saying goes, if it’s not profitable, they don’t want to sell it to you. These loans are not profitable for the mortgage industry, therefore, they don’t want to make it well known or super easy for these types of home sales to happen. After all, as mentioned in the benefits to buyers section, there’s lower upfront costs because there aren’t traditional mortgage fees associated with these loans. Just remember, The United States Department of Housing and Urban Development states that all FHA, VA and USDA loans are considered assumable if originated after 1989. You just need to be educated on certain criteria a seller would need to be following in order to keep themselves qualified to sell their home this way.
As enticing as it is that so many homes qualify for these assumable mortgages since any FHA, VA or USDA loan since 1989 is considered assumable, unfortunately it’s not always the most advantageous solution for buyers. Since a new homebuyer has to cover the difference in cash between the current loan balance and the new proposed sales price, a home that was purchased in 1997 with a new sales price of $500,000 but a current loan balance paid down to $50,000 probably won’t attract many buyers who want to bring $450,000 in cash to obtain a low interest loan of $50,000. The difference in your loan balance and new sales price has to be agreeable enough that the savings to a new buyer are advantageous. But fret not, there are plenty of homes and buyers that fit this model. We’re excited to tell you more.