How to Find an Assumable Mortgage When Looking for Homes

In 2013, interest rates hovered around 3.5% and then plummeted into the 2% range during the COVID-19 pandemic. This made houses significantly more affordable because buyers didn’t have to add a large portion of interest to their monthly payments. Throughout 2024, interest rates have hovered around 6.5%, which is still a drop from 2024 levels of nearly 8%.

Fortunately, there are options for buyers who are concerned about interest rates – or buyers who simply want to get good deals. You might be able to take on an assumable mortgage from a seller and enjoy their favorable interest levels. 

Assumable mortgages can be more complex than they seem. While there are certainly benefits to embracing one of these loans, they also come with drawbacks. Use this guide to learn how to find an assumable mortgage during the house-hunting process.

What is an Assumable Mortgage?

An assumable mortgage is when a seller transfers a mortgage to a buyer. The buyer takes on the interest rate, remaining principal, monthly payments, and other terms and conditions. They start making payments on the existing mortgage when they close on the house. 

A buyer who accepts an assumable mortgage will not need to go through the traditional loan shopping and application process. While there is still a review and underwriting process to take on an assumable loan, the buyer cannot work with different lenders or walk away from the house while retaining those mortgage terms. The lender, loan, house, and buyer and linked together as one. 

Assumable loans become popular when interest rates are high. Buyers look for sellers who have great loan terms that they wouldn’t be able to get elsewhere. Sellers who want to increase the desirability of the house can consider promoting their assumable mortgages to buyers and their real estate agents.

Buyers might realize that the home is more affordable because of the assumable loan, increasing the perceived value of the property.

Types of Assumable Mortgages

Many lenders allow buyers to assume mortgages from sellers. If you have a VA Loan or are looking at houses with FHA loans, you might still be able to assume those mortgages. Here are a few resources you can turn to. 

• FHA Loans: The Federal Housing Administration (FHA) says that its loans are assumable. However, the new buyer still needs to meet the lender’s criteria to qualify for the loan. 
• VA Loans: Veterans Affairs (VA) loans are assumable, even by non-veterans. This is good news for buyers who would otherwise not qualify. However, there are certain terms and conditions that both the buyer and seller have to meet for mortgage assumption. The seller will need to read these conditions or the buyer will need to meet with the lender. 
• USDA Loans: Loans from the United States Department of Agriculture (USDA) as also assumable for qualified buyers. USDA loans are designed to support people who want to buy houses in rural areas. 

Oftentimes, the challenge isn’t finding assumable mortgages. It’s finding sellers that know that their loan can be assumed. Sellers need to know about this concept and market any loan assumption options with the rest of their property.

How to Know if Assuming a Mortgage Makes Sense

Just because you can take on an assumable loan doesn’t mean you should. It is important to look at your finances and macroeconomic trends before you agree to adopt the loan balance. Here are a few things to consider when evaluating a mortgage payment to determine if adopting it is the right call. 

• Look at current interest rates. Compare national interest rates to those on the mortgage you are interested in assuming. Note how much lower the assumable rate would be. 
• Read about current market trends. You could get a better interest rate by waiting a few months to buy instead of searching for assumable mortgage transactions. 
• Evaluate your down payment. Determine whether you have enough to assume the mortgage. Some homes might have a large difference between the loan and the purchase price. 
• Ask about any unfavorable terms and conditions. You might not want to assume a mortgage if there are prepayment penalties or other restrictions. 

Assuming a mortgage isn’t always the right call. While this is a good fit for many buyers, it might not be right for you. You may be better off with a standard mortgage payment in the short term with the option to refinance to a lower interest rate in the future.  

How to Find an Assumable Mortgage

Once you have a clear understanding of assumable mortgages – and decide that they are right for you – you can start looking for them. There are a few paths you can take to contact sellers about these mortgage loans.

Know that assumable mortgage listings can be hard to find, especially if they are uncommon in your area. You may need to make the loan assumption part of your offer. Follow these steps to effectively take on a seller’s loan for a house you love. 

Find a Real Estate Agent

The real estate process to buy a house with an assumable mortgage is just like any other. Start by hiring a real estate agent you can trust. At FastExpert, we recommend interviewing at least three agents to learn about their experience and get a feel for their personalities. This is important for both buyers and sellers because they will be speaking to their agents almost every day during the house hunting and purchase process. 

When you interview your agents, ask about their assumable mortgage experience. See if they have worked with buyers who wanted to find assumable loans before and if they have worked with sellers who have led with assumable mortgage listings. Experience with both sides of the real estate process will help your agent streamline the deal and increase the chances of a smooth closing.

Online Real Estate Listings

Your real estate agent is supposed to help you find houses that meet your desired criteria. They can point out properties in your ideal neighborhood within your budget. When you specify that you want an assumable mortgage, your agent can look for homes where an assumable loan is mentioned. 

As a buyer, you also have tools to research houses and learn about your options. Turn to online listings like Zillow and Trulia to find potential houses. Read the descriptions and see if there are any mentions of an assumable mortgage. Your agent might also have additional tools and information pulled from the multiple listing service (MLS) to learn about potential homes. 

Finding a house is a team effort. Together, you and your Realtor can find a few high-potential properties to tour.

MLS (Multiple Listing Service)

The MLS is one of the most valuable tools for finding assumable mortgage options in your area. This is the tool where listing agents upload details about the home and share them with other agents within the area. Many real estate websites (including Zillow) pull data directly from the MLS. This is why information is consistent from one app to the next. 

When you tell your real estate agent that you are interested in assuming a mortgage, they will search the MLS for listings that specifically mention this. From there, they will identify other important criteria in your search. For example, they might check the number of bedrooms and bathrooms based on your needs or restrict the search to specific areas. 

The goal of the MLS is to make it easy for buyers’ agents to find houses and narrow thousands of listings into a few top contenders. Making an assumable mortgage part of your criteria is just one filter to add to the process.

Contact Lenders and Banks

If you and your real estate agent are having a hard time finding properties with assumable mortgage options in your area, you might be able to contact lenders and banks. They might be able to identify active listings that have these loans. 

Your Realtor also might be able to contact a lender directly if the seller of a house you are interested in doesn’t know if mortgage assumption is an option. While the seller and the listing agent should be able to do this research on their own, especially if it means getting offers on the property, they sometimes aren’t able or aren’t willing to do so. Your Realtor can step in for them.

Pros and Cons of Assumable Mortgages

Before you dig deeper to find assumable mortgages in your desired area, it’s important to have a clear picture of how these loans work. Here are a few benefits and drawbacks of taking on an assumable mortgage when you buy a house. 

Pros of Assumable Loans

• Lower Interest Rates: One of the main reasons why buyers seek out assumable mortgage listings is for lower interest rates. Buyers can save thousands of dollars in interest by assuming an existing mortgage loan. This can either make monthly payments more affordable or put expensive houses back in their price range. 
• Reduced Closing Costs: Closing costs may be lower with an assumable mortgage compared to those related to obtaining a new mortgage. This further reduces the buyers’ costs. 
• Faster Closing Process: It takes 48 days on average to secure a mortgage. However, this process can be faster for assumable loans. This is because the terms are already set, so the main focus is on evaluating the creditworthiness of the buyer.  
• No New Appraisal Needed: In some cases, an appraisal might not be necessary, simplifying the process. This often occurs if the loan is a smaller percentage of the home’s value or if the lender requested an appraisal recently when the loan originated.

The main benefit of taking on an assumable mortgage is the lower interest rate. However, the additional savings in closing costs and faster approval window can also help buyers streamline the purchase process. Assumable loans can make buying less stressful.

Cons of Assumable Loans

• Limited Availability: While many loans are assumable, not all of them have this option. It could take longer for you to find a house that you love that also has an assumable mortgage. Many sellers also don’t know if their mortgages are assumable, which makes it hard to identify whether loan assumption is possible when touring homes.  
• Qualification Requirements: Buyers must meet the lender’s criteria when assuming a mortgage. Even if a loan qualifies for assumption, the transaction could be denied if the buyer cannot meet the loan terms. 
• Potential for Higher Costs: If the current interest rates are lower than the assumed mortgage rate, buyers might end up paying more. Make sure the seller has a favorable assumable mortgage before moving forward with this option. 
• Existing Mortgage Balance: The buyer must cover the difference between the purchase price and the remaining mortgage balance. This requires a hefty down payment, which could be even higher if the house has appreciated in recent years. Large down payments aren’t always feasible for buyers. 

One of the biggest concerns about assumable loans is the buyer’s down payment. For example, if the seller bought the house for $400,000 and took out a $350,000 loan, then their down payment was $50,000. If the house is selling for $500,000, then the down payment jumps to $150,000 for the buyer. This could be even higher if the seller has paid off a portion of the loan.

Buyers May Need Second Mortgages for Assumable Mortgages

Not all buyers have large enough down payments to take on an assumable mortgage. Not only do they need to match the down payment of the seller, but they also need to cover the cost of the home’s appreciation and whatever part of the loan the seller paid off. This makes assumable mortgages expensive in the short run, even if buyers save with lower interest rates in the long run. You will need more cash on hand. 

One way to move forward with an assumable mortgage if you can’t meet the down payment requirements is to take out a second loan. You would assume the mortgage from the seller and take out a second mortgage to cover the rest. While this is a potential solution, it is a dangerous one for both the buyer and the lender. Buyers have to take on two payments each month and lenders are wary that they might default on one of the loans. You also might not get favorable rates on the second loan because of the increased risk. 

You may be better off getting a conventional loan instead of taking on an assumable mortgage and a second mortgage at the same time. Run the numbers to make sure the math makes sense and you will actually save in the long run. 

Ask Your Real Estate Agent About Assumable Mortgages

Assumable mortgages present opportunities for buyers to get favorable interest rates, reducing their monthly payments and total home costs. However, they can be hard to find. Even if you find a seller who is marketing an assumable mortgage, the potential down payment could be out of your reach. 

Talk to your real estate agent about assumable loans and how you can find properties that have them. If you need to find a Realtor in your area, try FastExpert. You can read profiles of nearby agents and get to know their specialties. You can also reach out directly to ask about assumable mortgage loans and opportunities to find them in your area. 

Explore FastExpert today and take the first steps toward buying your dream home.