Interest rates were roughly 3.5% in 2013; however, during the COVID-19 pandemic, they fell as low as 2%. Since purchasers no longer had to include a sizable amount of interest in their monthly payments, this greatly reduced the cost of homes. Interest rates have remained relatively low in 2024, averaging 6.5% compared to 2024 levels of about 8%. Thankfully, buyers who are worried about loan rates or just want to acquire good offers have options. This means it might be possible to benefit from a seller's favorable interest rates by accepting an assumable mortgage. 

The thing is that mortgages that are assumed can be trickier than they appear. Accepting one of these loans has advantages, no doubt, but there are cons as well. Therefore when looking for a home, it’s best to understand how to find the right assumable mortgage first.

What Is Assumable Mortgage About?

Basically, a seller who transfers a mortgage to a buyer is considered an assumable mortgage. This means that the monthly payments, interest rate, remaining principal, and other terms and conditions are assumed by the buyer. The payment on the mortgage comes after closing of the property.

When a buyer accepts an assumable mortgage, they are not required to apply for loans through the conventional procedure of loan shopping. Even though taking on an assumable loan still requires review and underwriting, the buyer cannot switch lenders or leave the property while the mortgage terms are still in place. The buyer, house, financing, and lender were all connected as a single entity.

Assumable loans gained popularity when the interest rates were still high. Buyers search for loan suppliers offering exceptional loan conditions that they can't find elsewhere. Assumable mortgages are something that sellers can advertise to purchasers and their real estate agents to make their homes more appealing.

The assumable loan may make the house appear more affordable to buyers, therefore raising the property's perceived worth.

Assumable Mortgage Types

Purchasers can take over sellers' mortgages with many lenders. It may still be possible for you to take on those mortgages if you have a VA loan or are considering a home with an FHA loan. These are some resources that you can utilize.  

• FHA Loans: Assumability is stated by the Federal Housing Administration (FHA) regarding its loans. To be eligible for the loan, the new buyer must still fulfill the requirements set forth by the lender. 
• VA Loans: Even non-veterans are eligible to assume Veterans Affairs (VA) loans. This is fantastic news for customers who would otherwise not be eligible. To assume the mortgage, the buyer and seller must, however, agree to a few terms and conditions. The buyer or seller must either meet with the lender or read these requirements.

USDA Loans: For eligible buyers, loans from the United States Department of Agriculture (USDA) may also be taken out. USDA loans are designed to help people buy houses in rural areas.

Finding assumable mortgages is frequently not the most challenging part; finding sellers who are aware that their debt can be assumed is. Sellers should thoroughly understand how it works and market any alternatives they may have for debt assumption alongside the rest of their property.

How To Determine If Getting A Mortgage Is A Good Idea

It's not a good idea to take on an assumable loan just because you can. Before accepting the loan balance, it is crucial to assess your financial situation and the macro trends. Here are some factors to think about while assessing whether or not to adopt a mortgage payment.

• Take a look at interest rates right now. Examine the interest rates on the mortgage you are considering taking out against the national average. Take note of the assumed rate's significant drop. 
• Learn about the latest developments in the market. Waiting a few months before making a purchase may result in a better interest rate than searching for assumable mortgage transactions.
• Consider your down payment. Assess your financial situation to see if you can take on the mortgage. The discrepancy between the purchase price and the loan amount for some residences may be significant. 
• Find out whether there are any unfavorable terms and conditions or not. If a mortgage has prepayment penalties or other restrictions, you might want to look for other options.

Taking out a mortgage isn't always the best option. Although many customers find this to be a good alternative, it might not work best for your current situation. With the chance to refinance at a reduced interest rate later on, you might be better off paying a conventional mortgage payment in the short run. 

Finding Assumable Mortgage 

You can begin your search for an assumable mortgage once you have a firm understanding of them and determine that they are the best option for you. You may get in touch with sellers regarding these mortgage loans in a few different ways.

Be aware that assumable mortgage listings may be difficult to find, especially if they are not common in your area. The loan assumption might need to be included in your offer. To successfully take on a seller's loan for a home you adore, follow these instructions. 

Looking For A Real Estate Broker

Purchasing a home with an assumable mortgage follows the same procedures as any other real estate transaction, which might mean working with a reliable real estate agent first. 

Before hiring a real estate agent, ask them about their experience with an assumed mortgage. Check to see if they have previously assisted buyers looking for assumable loans and if they have previously dealt with sellers who have taken the lead on assumable mortgage listings. Your agent will be able to expedite the transaction and improve the likelihood of a smooth closure if they have experience on both sides of the real estate process.

Our team at RE/MAX Advanced Realty are trained, licensed and, and experienced when it comes to assumed mortgage as well as home selling and buying transactions in Indiana. You may reach out to us today to know more about our offers or to find the best realtor near you.

Internet-Based Listings of Real Estate

Finding homes that fit your ideal requirements is what your real estate agent is supposed to help you with. They can recommend affordable homes in the neighborhood of your dreams. They can also search for properties where an assumable loan is listed if you specifically request an assumable mortgage.

As a buyer, you have resources available to examine homes and understand your options. Use websites such as Zillow and Trulia to find possible Indiana homes. Read the home description carefully to see whether an assumable mortgage is offered or not.

To learn more about possible houses, your realtor may also have access to extra resources and data that have been taken from the multiple listing service (MLS). 

Finding a home that suits your needs might be challenging; however, as long as you’re working with the right realtor, it can be easier to find high-potential residences you can visit.

MLS (Multiple Listing Service)

The Multiple Listing Service (MLS) is a great resource for finding assumable mortgage options in your area. Listing agents use this feature to post property details and share them with other agents in the neighborhood. A lot of real estate websites use the MLS to get information that is consistent across apps.

Once you inform your real estate agent that you are considering taking on a mortgage, they will look through the multiple listing service (MLS) for properties that make this clear. They will then go on to find other crucial search criteria. For instance, based on your needs, they might verify the number of bedrooms and bathrooms or limit the search to particular regions. 

Thousands of listings are whittled down to a select few top choices by buyer's agents with the help of the Multiple Listing Service (MLS). One more filter to add to the process is to make an assumable mortgage one of your requirements.

Talk To Banks And Lenders

You may be able to get in touch with lenders and banks if you and your real estate agent are having trouble locating homes in your neighborhood that offer assumable financing alternatives. They might be able to locate these loans in live listings. 

In case the seller of a home you are interested in is unaware of the possibility of mortgage assumption, your Realtor may also be able to get in touch with a lender on your behalf. Even though the seller and the listing agent ought to be able to conduct this independent research, particularly if doing so would require receiving offers on the property, there are situations in which they are unable or unwilling to do so. Your Realtor can step in for them.

Pros And Cons Of Assumable Mortgages

It's critical to understand how assumable mortgages operate before delving further to locate them in the location of your choice. When you purchase a home, there are certain advantages and disadvantages to having an assumable mortgage.

Pros Of Assumable Debt

• Reduced Interest Rates: Reduced interest rates are a major factor in buyers' search for assumable mortgage listings. Assuming an existing mortgage debt can result in interest savings for buyers amounting to thousands. This has the potential to lower monthly payments or bring pricey homes back into reach for some people. 
• Cheaper Closing Expenses: Assumable mortgages may offer cheaper closing costs than new mortgages. This lowers the costs for the purchasers even further. 
• Faster Closing: Obtaining a mortgage usually takes 48 days. However, for assumable loans, this procedure might go more quickly. This is because the terms have already been agreed upon, so the buyer's creditworthiness is the primary consideration.  
• No New Appraisal Needed: This streamlines the process by removing the need for an appraisal in some circumstances. This frequently happens when the loan represents a lesser portion of the house's worth or when the lender asks for an appraisal at the time the loan was established.

The reduced interest rate is the primary advantage of taking out an assumable mortgage. On the other hand, purchasers may also find it easier to expedite the acquisition process because of the extra closing cost savings and shorter approval timeframe. Buying can be less stressful with an assumable mortgage.

Cons Of Assumable Debt

• Restricted Availability: Not all loans have the option to be assumed, even though many do. It can take longer for you to locate a dream home with an assumable mortgage. It can be challenging to determine whether loan assumption is feasible when viewing homes because many sellers are unaware of the assumability of their mortgages.  
• Qualifications: Before taking out a mortgage, buyers must fulfill the requirements set forth by the lender. If the buyer is unable to fulfill the loan terms, the transaction may be refused even if the loan qualifies for assumption. 
• Possibility of Higher Costs: Purchasers may pay more if the current interest rates are lower than the anticipated mortgage rate. Before pursuing this option, be sure the seller has a suitable assumable mortgage. 
• Existing Mortgage Balance: The buyer is responsible for paying the shortfall between the purchase price and the amount still owed on the mortgage. This calls for a sizable down payment, which may increase if the house has increased in value recently. For certain customers, large down payments are not always possible.

When it comes to assumable loans, the buyer's down payment is one of the main worries. For example, if the seller funded $350,000 of the home's $400,000 purchase price, the down payment would have been $50,000. If the house sells for $500,000, the buyer's down payment increases to $150,000. If a portion of the loan has been paid off by the seller, this could be considerably greater.

Second Assumable Mortgage Might Be Needed

Not all purchasers can afford to take on an assumable mortgage because of their little down payment. In addition to matching the seller's down payment, they also have to pay for the appreciation of the house and whatever portion of the loan that the seller has paid down. 

Because of this, even though purchasers ultimately save money with reduced interest rates, assumable mortgages are costly in the short term. You might require additional cash on hand.

If you are unable to make the required down payment, you may still proceed with an assumable mortgage by taking out a second loan. To cover the remaining amount, you would obtain a second mortgage and take over the seller's mortgage. Although this is an option, it carries risk for the lender as well as the customer. 

Lenders are concerned that buyers may default on one of the loans because they are required to make two payments every month. Due to the higher risk, you might not be able to receive good rates on the second loan.

You may be better off acquiring a conventional loan instead of taking on an assumable mortgage and a second mortgage at the same time. Make sure the math makes sense and that you will save money over time by running the figures. 

Find Out About Assumable Mortgages From Your Real Estate Agent

With assumable mortgages, purchasers can take advantage of better interest rates, which lowers their monthly payments and overall housing expenses. But finding them can be challenging. If you locate a seller who is offering an assumable mortgage, the possible down payment can be beyond your financial means.