How to Assume a Mortgage in California

Consider other options to home ownership.

California home sellers with a competitive or below-market mortgage rate on their property may find it beneficial to transfer the property with a mortgage assumption. The process in California is fairly simple, with one major exception: The loan being assumed must be "assumable," and the assumption must be allowed by the lender. Most FHA, VA and adjustable-rate mortgages are assumable. As a result of the mortgage industry implosion, however, lenders have imposed stricter guidelines and limitations on assumptions.

Things You'll Need

• An assumable loan

Instructions

1. Review the mortgage note to discern whether the mortgage is assumable. The note may contain a "due-on-sale" clause, which requires that the loan be paid off in the event of a sale, preventing an assumption of the mortgage.

   Assumption guidelines are set by banks and lenders issuing the mortgages. Most lenders are national. Therefore, the assumption rules and process do not differ from state to state.

2. Locate the section of the mortgage note that contains the word "assumable" if there is no due-on-sale clause. This indicates that the mortgage loan is assumable and can be transferred to another borrower.

3. Contact the lender and request an assumption package. This package contains the lender's instructions and requirements for granting the assumption.

4. Complete the package and return it to the lender as instructed, along with the applicable processing fee. Provide the requested supporting financial information, which may include pay stubs, bank statements and tax returns.

5. Keep in direct contact with the seller and lender throughout the entire process. The lender may take up to 60 days to issue a decision.

Tips & Warnings

• Provide financial information that is no less than 60 days old.

• Consider using a mortgage broker to assist you.

• Read the note and assumption terms carefully with regards to liability.

• The existing borrower will remain secondarily liable for the mortgage unless released of liability by the lender.

• The new buyer must qualify for the loan according the existing lender's guidelines.

• Mortgages in default may be declined for an assumption.

• The lender will most likely charge a nominal fee of $50 to $150 to process the assumption, but the fee can vary between lenders.

References

• Fannie Mae: How to Process a Request for a Mortgage Assumption

Resources

• The Free Dictionary by Farlex: Assumption Legal Definition