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Everything You Need to Know About the FHA Assumable Loan

I’m going to let you in on a secret—really, most people don’t know about it. Did you know that FHA loans (these loans are backed by the federal government) are assumable?

An assumable mortgage lets the buyer take over the seller’s interest rate, current payment amount, repayment period, and any other applicable terms of the mortgage. The buyer does not obtain a brand-new mortgage. Also, FHA loans can be assumed even if the house isn’t sold (like if there’s a divorce or someone wants to give the house as a gift). Here’s how a buyer can take over a seller’s loan.

What is an FHA Loan?

An FHA mortgage is a mortgage that is secured by the federal government, specifically the Federal Housing Administration. Basically, this means that if a borrower quits paying and loses their home in a foreclosure, the government will make sure the lender doesn’t suffer any losses.

FHA loans require:

Considerations for Buyers

There are both advantages and disadvantages for buyers who take over a seller’s FHA loan, and it can be a complex situation. If you need help, I’m here to talk through it with you.

Advantages

Disadvantages

Considerations for Sellers

Advantages

Disadvantage

A Note of Caution

You should never enter into an arrangement where someone else assumes your mortgage without a lender. If a seller told someone to move in and make payments, they’d basically be a landlord with full responsibility of the mortgage. This isn’t actually an assumable mortgage, and it’s always best to cover your bases by using a lender.

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