The Power of Assumable Mortgages

Assumable low interest mortgages are a big opportunity in the market that most home buyers don’t hear much about. Assuming a mortgage at 2.5%-3.5% when market rates are over 7% is one of the most savvy financial decisions any home buyer could make, especially young or first time homebuyers who are early in their saving and investing lives. You may not get the perfect house, but you’ll get the perfect mortgage, which frees up a ton of money to get more out of life. Many people understand that VA mortgages (Veteran’s Administration or VA loan) are assumable but the overwhelming majority of Veterans who will allow their mortgage to be assumed want all of their entitlements back, which means they’ll only allow another Veteran to assume their mortgage. However, what most homebuyers miss is that all government loans are assumable which includes FHA and USDA loans. Many real estate agents don’t even know that so won’t see “Assumable FHA loan” in the property descriptions. When we help clients shop for homes, we research each home to find out if there is an existing FHA or USDA mortgage. The other missing opportunity with assumable mortgages is shopping in the right price range. For example, if the market rates are 7.25% and a homebuyer is qualified for $400k, we can shop for a home at $600k or more with an assumable mortgage buying strategy. Assuming a mortgage for $600k at 3.5% is still less expensive than a new mortgage at $400k and 7.25%.