are fha mortgages assumable

For example, if the seller only has an assumable mortgage amount of $100,000 but is selling the home for $150,000, the buyer will have to come up with the additional $50,000.

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For an assumption to move forward, both the lender and investor in the mortgage (e.g. Fannie Mae, Freddie Mac, FHA, VA, etc.) have to agree.

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For FHA and VA loans that funded after December 14, 1989, while the loans are still assumable, the buyers must demonstrate the ability to repay the mortgage and qualify as with any other loan type. If a seller has an FHA or VA mortgage on the property, the loan may be assumed by any qualified buyer.

Time Frame. According to the Department of Housing and Urban Development (HUD) guidelines for FHA-insured mortgages, all FHA loans are assumable. Any loans originated before Dec. 1, 1986, are freely assumable, which means there are no restrictions on the assumption.

One less known advantage of selling a home with an FHA mortgageis that these loans are assumable. Meaning, the buyer who still needs financing to pay for the home, can simply just take over the loan. This way, they can save on interest (given the original mortgage carries a low interest rate), and on the cost of closing.

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Not all loans are assumable – typically just some FHA and VA loans are assumable. An assumable mortgage is one that a buyer of a home can take over from the seller – often with lender approval – usually with little to no change in terms, especially interest rate.

An FHA loan assumption is generally possible-for most FHA loans closed today, the lender’s participation and approval will be required in order to carry out a loan assumption transaction. There are also occupancy requirements which may apply depending on what year the original mortgage was closed in. From HUD 4000.1:

In lending, mortgage assumption occurs when a mortgage loan is transferred from a home seller to a buyer, who then takes over the loan’s payments. In the United States, most mortgage loans aren’t.