Secure the strongest cash offer on your home. Skip the stress, showings and open houses. Get a guaranteed offer on your home today. Get A Cash Offer Now
We’re receiving many questions about how assumable loans work because of where interest rates are right now. Today, let me talk about how it works and the benefits of assumable loans.
Almost all government loans, like FHA loans, are assumable. While the process for assuming a loan is unique and doesn’t apply to every situation, it works best when the homeowner bought the property about two years ago when interest rates were still low. Still, they haven’t had the opportunity to pay off much equity. This is the ideal scenario because it is easier for potential buyers as they don’t need to come in with as much cash upfront.
Let me give you an example. We currently have a home listed for $415,000. The current homeowner owes about $323,000 on it, with a low interest rate of 3.375%—a figure we likely won’t see again for quite some time. The monthly payments on this loan are around $1,800. If someone were to get a new loan in today’s market for $415,000, they’d probably be paying closer to $3,000 a month for this home.
To help both the buyer and the seller, we followed this process: We had the seller call their current loan company to ask whether their loan is assumable. Since it was an FHA loan, the lender confirmed that it was. They then mailed a packet with instructions on how to get the loan assumed for these clients. The benefit is that there aren’t any closing costs for the buyers. They don’t need to do an appraisal or anything similar. They’re just replacing the current owner’s name on the loan with their buyer’s.
Do the buyers still need to qualify? Yes, they do. They must have the required credit score, income, and other qualifications for the loan. However, there aren’t many closing costs associated with this process.
If you do the math, $415,000 minus $323,000 is the amount the buyer needs to bring to the closing table. This works out great for this particular buyer, who bought a home a couple of years ago and now has about $150,000 in equity. They can take that equity, roll it into the new house, and get a property worth $415,000 in today’s market for an affordable monthly payment of $1,800, which is great.
If you have any questions about assumable loans, please reach out. I’d love to explore specific scenarios with you and see how we could help. You can call or text me at (208) 675-9798 or send me an email at Desi@RevistaRealty.com. This approach could be a game-changer in today’s high-interest-rate environment.
