Can I Assume a Mortgage in Foreclosure?

In a mortgage assumption, you take over the mortgage from the previous homeowners.

When a homeowner can't make his mortgage payments, the lender may take possession of the property and sell it to recover its losses in a process known as a foreclosure. Before the lender officially starts the foreclosure process, you can still assume the mortgage. However, once the foreclosure process begins, the lender terminates the mortgage and you can't assume it.

Features

A mortgage assumption is an option for homeowners who can't afford their mortgage payments. It allows these homeowners to get relief from the debt and walk away with minimum damage to their credit scores. If you assume a mortgage, you help a homeowner in need and usually get a good deal on the property. You would take over the mortgage, make the delinquent payments he homeowner has missed and continue paying the mortgage.

Eligibility

Lenders that offer the option of mortgage assumption usually service government loans, such as Federal Housing Administration loans, U.S. Department of Housing and Urban Development loans, Fannie Mae loans and Freddie Mac loans. Lenders don't usually allow mortgage assumption once the foreclosure process starts. The lender usually requires you to meet several criteria to ensure you can afford the mortgage payments before allowing you to assume the mortgage. For example, you may have to have a good credit score and good debt-to-income ratio.

Process

When a homeowner realizes he can't afford his mortgage payments and he has to give up his home, he contacts his lender to negotiate a way out. He presents various financial documents to prove he is facing financial distress and finds out whether the lender allows mortgage assumption. After finding a suitable person to assume the mortgage, the homeowner talks to a lawyer and arranges the mortgage assumption process with his lender.

Considerations

Scammers that take advantage of homeowners in financial distress often claim to want to help and save them from foreclosure. They allow the homeowner to rent the property, take the equity in the home and walk away. This eventually leads to a foreclosure. Because of this, homeowners are often wary of strangers and real estate companies that offer to assume their mortgage. They prefer to allow relatives to assume the mortgage, making it difficult for you to find a suitable mortgage to assume.

References

• Wayne County Mortgage Foreclosure Prevention Program: Foreclosure Information