![]() ![]() Under certain conditions, USDA and VA loans are assumable as well. Congratulations, you just leveraged your assumable FHA loan to sell your home more easily and with a bigger price tag. Collect the remaining balance from the buyer, which, again, is the asking price less the assumed loan amount. The assumption is complete and you are officially released from the loan. You’ll have to pay off the loan quickly, and the buyer will not be held responsible for the loan. ![]() Another fun fact: if you allow a buyer to assume the loan without the lender’s approval, the loan can become immediately due and payable. Until then, you are 100% liable for the loan. This is achieved when you receive a form called “ HUD-92210.1” or “Approval of Purchaser and Release of Seller." It must be worked up by the servicer and signed by all parties. Perhaps the most important part of a loan assumption is releasing yourself from the liability for the loan. Receive a Release Of Liability From Your Servicer Due to privacy and liability issues, do not agree to deliver the documents to your servicer for the buyer. Have your buyer send these items to your servicer directly. Your servicer will send a list of required documents needed to approve the assumption. Have the Buyer Apply With Your FHA Loan Servicer But you may be able to justify a higher list price, or get the home bid up in a multiple-offer situation. Make sure you advertise the upfront cash requirement so you don’t attract buyers who think they need the standard 3.5% down.īuyers can receive a second mortgage to cover the difference, up to 96.5% of the sale price adding together the existing and new loan amounts.Īsk your real estate agent to list the home at a price that reflects the benefit of the assumption. This is equivalent to a 14% down payment, much more than the standard 3.5% down required for a new FHA loan. The buyer must have an adequate down payment to cover your purchase price less the existing loan balance. Ask your servicer about its assumption turn times. Otherwise, it can use another company to review your buyer’s file. ![]() In this case, the process could be faster since it can use its own HUD-approved FHA underwriters. Sometimes the servicer is also a mortgage company. In most cases, the FHA lender or servicer must perform the review, as much as they wish this were not true.īut the lender could drag their feet. Nearly all FHA loans are assumable unless that particular loan is barred for some reason by the Department of Housing and Urban Development, or HUD, the overseer of FHA loans. You don’t want to advertise an assumption just to find out that the servicer takes an inordinate amount of time to review assumptions. Make Sure the Servicer Can Review The Buyer’s Assumption Application In A Timely Manner Your servicer is the company to which you make payments. Contact the Servicerīefore you list the home, make sure your servicer knows your plan. And, your existing FHA loan holder must agree to approve the new buyer. Here’s the general process, which may look a bit different depending on your current loan holder (servicer) and your buyer.Īn assumption is not as easy as crossing your name off of your loan documents and writing in your buyer’s name. ![]() It could take some legwork from you and your buyer to make it happen. Still, there’s no streamlined way to assume a mortgage. You could potentially sell your home for a higher price than your neighbor because of your low FHA rate.Īnd the buyer could save hundreds or perhaps over a thousand dollars per month by assuming your loan. Now, there’s serious motivation on both sides. Neither the buyer nor seller wanted to learn how they worked because the buyer could apply for their own low-rate FHA loan. Loan assumptions were a near-extinct feature of FHA loans when rates were low. You could fetch top dollar for your home simply because of your assumable mortgage. What home price do you think your buyer would pay for that?įHA loans are assumable, meaning your buyer may qualify to "assume" or take responsibility for your loan instead of getting a new one. On a $300,000 loan balance that’s a savings of over $700 per month. If you have an FHA loan, it’s a real possibility.įor example, you have a 3% mortgage rate. What if you could offer the buyer of your home your current mortgage rate? As you can imagine, that would be quite a draw. ![]()
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