Assumable Loans
Certain specific type of Home Loans allow the transfer of a loan balance and its terms to another person. The Loans that allow such an arrangement are known as Assumable loans or Assumable mortgages. Assumable mortgages are specially beneficial in situations when current interest rates in the market are high. The new borrower assumes the loan with the prior low interest rate of the mortgage.
The new borrower must meet the lender's underwriting criteria in order to assume the loan. FHA Loans, VA Loans and USDA Loans are eligible Assumable loans if certain criteria is met. For VA Loans, the borrower does not have to be a serving or a retired military person to assume the loan.
Assumable Loans can be beneficial if the prior owner has low equity in the house, otherwise the new borrower has to come up with a higher out of pocket amount to pay the old borrower before the transfer can take place.
The final approval of the loan transfer or assumption of the mortgage by the new borrower is with the lender. The new buyer must meet the underwriting criteria of the lender before a loan assumption can take place.
Related Topics: What are Jumbo Loans? Conventional Loans FHA Loans VA Loans USDA Loans An Adjustable Rate Mortgage A Fixed Rate Mortgage Construction Loans Graduated Payment Loans
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