Can I Get an Assumption on My Mortgage?
Home ownership has traditionally been considered a key part of the American dream. When a person purchases a home, she usually does so with the intention of being in that home for many years, if not a lifetime. Sometimes, though, individuals find themselves in difficult financial situations which make it unfeasible for them to stay in their homes. A mortgage assumption is one possible solution for those who need to be released from their mortgages.
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Assumption
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A mortgage assumption is an arrangement that allows the buyer of a home to assume all aspects of the seller's original mortgage obligation. This includes the assumption of the remaining balance on the mortgage, all subsequent monthly payments, as well as any additional mortgage terms, including the current interest rate on the mortgage. This allows the seller of the home to completely absolve herself of any legal or financial obligation on the mortgage.
Benefits
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In addition to the benefits to the home's seller, a mortgage assumption also offers an attractive financial situation for the buyer. When home interest rates are high, a mortgage assumption not only becomes a smart investment, but can save a buyer tens of thousands of dollars over the course of the life of the assumed mortgage. This is because the buyer will be assuming a home mortgage at an interest rate that is lower than any available in the current housing market.
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FHA Assumption
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If you are a home owner who has an FHA, or Federal Housing Administration, insured home, your potential buyer must meet certain qualifications.. If your home mortgage was originated prior to December 1, 1986, your potential buyer has to qualify for an assumption based on the FHA's "simple" process, in which the buyer signs a document agreeing to secondary responsibility for the remainder of the mortgage. If your mortgage originated on or after December 1, 1986, your buyer needs to qualify based on his credit worthiness.
Other Mortgage Type
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If you have another type of mortgage, obtaining an assumption may be met with resistance, as most lenders lose money when they allow such sales, due to the lower interest rate on the mortgage. Your best chance for securing an assumption is to talk with your lender, since its permission is usually necessary beforehand. If you do secure an assumption, be sure to verify that you are not liable should the new buyer fail to make the mortgage payments.
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References
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