If you are in the market to buy a home right now, you probably have been hearing a lot about assumable mortgages. But you may not know what they are or how they work. This post will explain exactly what an assumable mortgage is and introduce you to its pros and cons so you can figure out whether an assumable mortgage may be right for you.

What is an Assumable Mortgage?

 Buying a home with an assumable mortgage simply means that you take over (“assume”) the mortgage from the previous owner.

Pros of Assumable Mortgages

Assumable mortgages offer a couple of advantages that make them enticing, especially in times when housing costs and interest rates are high.

1. The interest rate may be low. Assuming a mortgage allows you to not only take over the loan but to do so at the loan’s existing interest rate. So, say you are buying from a seller who locked in a low mortgage rate when they bought the home. You can continue to enjoy that same low-interest rate after purchasing the home.

2.  The sale process may move quickly. Another possible advantage of an assumable mortgage is that the process to qualify may be streamlined and simplified. Additionally, many sellers offer accessible mortgages specifically because they need to sell their homes quickly. So, the entire process can be fast and easy.

Cons of Assumable Mortgages

Although assumable mortgages have some exciting benefits, there are a couple of possible drawbacks you need to be aware of.

1. Conventional mortgages are not assumable. For starters, you cannot get a conventional mortgage as an assumable mortgage. Assumable mortgages can only be USDA, VA or FHA mortgages. To get an assumable mortgage, you will have to qualify for one of those types of loans. During your consultation, I can help you figure out if you are eligible for one or more of these government-backed loan products.
2. You may need a substantial amount of cash. Let’s say you want to assume a mortgage for a home that the previous owners originally bought for $300,000. Today, that home is worth $400,000. During the time the previous owner lived in the home, they paid off $20,000 of their mortgage, bringing the balance down to $280,000. But in the meantime, the value of the home has risen to $400,000. If you want to assume that mortgage, you need to assume the $280,000 plus an additional $120,000 (which adds up to $400,000). If you do not have this money as cash, you would need to find another way to borrow the additional $120,000. On an Assumable VA mortgage, the Seller's VA Entitlement is tied to the VA loan that is being assumed. This means that if the new Buyers were to default on the loan, it would negatively impact the previous owners of the property.

Get Answers to Your Questions About Assumable Mortgages

Hopefully, you now feel clearer about how assumable mortgages work, and what their benefits and drawbacks are. To learn more about assumable mortgages, please call McGowan Mortgages today at (816) 631-9687 to schedule your home loan consultation. Together, they can figure out whether an assumable mortgage may be right for you.

Contact Information:

McGowan Mortgages

800 E 101st Terrace Ste. 350B
Kansas City, MO 64131
United States

Derek Mcgowan
https://www.mcgowanmortgages.com/