Assumable Mortgages
Assumable Mortgages: What Real Estate Agents Need to Know
What is an Assumable Mortgage?
An assumable mortgage allows the buyer to take over the seller's existing mortgage, keeping the original interest rate, monthly payment, and remaining loan balance. For buyers, this means potentially securing a lower interest rate compared to current rates. For sellers, it's a powerful selling tool, especially in a high-interest-rate market.
To assume a mortgage, the buyer must qualify for the loan just like they would with a new mortgage, but they inherit the original terms, making it a win-win for both parties.
Types of Assumable Loans and How to Identify Them
Only certain types of loans are assumable:
FHA Loans: Assumable with approval from the lender.
VA Loans: Can be assumed by both veterans and non-veterans.
USDA Loans: Assumable with lender approval.
Typically, Conventional Loans are generally not assumable unless specifically stated in the loan terms. Most conventional loans have a "due-on-sale" clause, which requires the full repayment of the loan when the property is sold or transferred. This clause prevents a new buyer from assuming the loan and taking over the original interest rate and terms.
However, under rare circumstances, a lender may allow an assumption if both parties agree, but this is unusual and would need explicit approval from the lender. In practice, only FHA, VA, and USDA loans are commonly assumable.
To find out if a home has an assumable loan, check the loan type and confirm with the seller’s mortgage servicer. If the home is listed in MLS, look for fields indicating loan type, but it’s essential to confirm with the lender.
How Buyers Qualify for an Assumable Mortgage
The buyer must meet the lender’s requirements, which include:
A credit check.
Proof of income.
Debt-to-income ratio evaluation.
The buyer must also cover the seller's equity in the home. This is the difference between the loan balance and the home's selling price, often requiring either cash or secondary financing.
Financing the Gap with Roam Boost
Roam partners with Spring EQ to provide secondary financing to bridge the gap between the loan balance and the purchase price. Buyers can qualify for as little as 10% down (outside Texas) and still take advantage of low-rate assumable mortgages.
Working with Buyers: Key Steps
Find the Right Property: Use Roam’s discovery tool to find listings with assumable mortgages, which can save buyers thousands of dollars.
Qualify the Buyer: Ensure your buyer is pre-approved and financially ready to assume the loan. Work with Roam to streamline the process.
Submit an Offer: When submitting an offer, include details about the assumable mortgage to make your offer stand out.
Closing Process: Once the offer is accepted, Roam coordinates the transaction between all parties to ensure a smooth closing process.
Working with Sellers: Marketing Assumable Mortgages
Sellers with assumable mortgages have a unique advantage. Here’s how to market it:
Highlight the low-interest rate in your listings.
Use Roam’s marketing materials to emphasize this feature.
Roam verifies and lists assumable mortgages, helping you connect with motivated buyers.
Seller Obligations: Once the assumption is complete, the seller is released from the mortgage liability, and their name is removed from the loan. This protects their credit and future financial standing.
Roam’s 45-Day Closing Guarantee
Roam guarantees closing within 45 days or will cover the seller’s principal and interest payments if there’s a delay.
Working with Roam: Tips and Tricks
Use Roam’s Discovery Tool: Search for homes with assumable mortgages by city, zip code, or school district, and set up alerts for new listings.
Verification Process: Use Roam’s verification process to ensure the details of assumable mortgages are accurate.
Leverage Roam’s Expertise: Roam acts as a transaction coordinator, managing the assumption process and handling the paperwork, so you don’t have to.
Marketing Materials: Use Roam's custom marketing materials to stand out and attract more buyers.
Partner with Roam: You can become a Roam Preferred Agent to connect with more qualified buyers looking for assumable mortgages.
For more information or to schedule a consultation, visit Roam.
Understanding the Assumable Loan Process
Here are a few more important points you might want to share with agents to ensure they fully understand the value of working with assumable mortgages and Roam’s tools:
1. Eligibility for Assumable Mortgages
Types of Loans: Remember that usually only FHA, VA, and USDA loans are typically assumable. These loans can offer buyers much lower interest rates than what’s currently available.
Primary Residence Requirement: For FHA loans, buyers must intend to occupy the home as their primary residence for at least one year. VA loans have more flexibility, allowing non-veterans to assume them as long as they meet VA lender requirements.
2. Buyer Qualifications
Full Credit Check: Buyers must go through a full qualification process, similar to applying for a new mortgage, including income verification, credit checks, and debt-to-income ratio reviews.
Down Payment: Buyers must cover the difference between the home’s selling price and the remaining balance on the loan (seller’s equity). They can use Roam Boost or another secondary financing option to bridge this gap.
3. Seller's Responsibilities
Liability Release: Once the mortgage is assumed by the buyer, the seller is fully released from any liability, which means their name is removed from the loan.
Marketing Assumable Mortgages: Sellers should use this feature as a strong selling point, especially in today’s market where rates are much higher. Roam provides personalized marketing materials that can make the listing stand out.
4. Roam’s Role as Transaction Coordinator
Roam acts as a transaction coordinator, facilitating communication between the buyer, seller, lender, and title company. This ensures a smooth process from offer to closing.
45-Day Closing Guarantee: Roam guarantees closing within 45 days, or they’ll cover the seller’s principal and interest payments if there’s a delay.
5. Roam’s Marketing Tools for Listings
Roam offers free, personalized marketing materials, including listing banners and flyers to emphasize the assumable mortgage and attract more potential buyers.
Agents can also use Roam’s Assumable Mortgage Discovery Tool to search for homes with assumable loans and receive notifications when new listings are available.
6. Partnering with Roam
The Cliff Freeman Group is a Roam Preferred Agent, giving us access to a network of pre-qualified buyers and verified listings, which helps to streamline the assumption process and close more deals.
7. Additional Tips
Pre-Qualification: Encourage agents to ensure buyers are pre-qualified before submitting an offer, which will speed up the assumption process.
Appraisal Waivers: In most cases, an assumption does not require an appraisal, saving time and money for buyers.
Blended Rate: Explain to agents that even when a buyer needs secondary financing, the blended rate of both loans is often lower than today’s market rates.
ROAM - AGENT PLAYBOOK SUMMARY
The PDF contains a comprehensive guide called the Roam Agent Toolkit with resources and explanations for real estate agents working with assumable mortgages. Here’s a breakdown of the key sections:
Introduction: Explains how Roam simplifies the mortgage assumption process and acts as a transaction coordinator, handling the complexities of assumptions for agents, buyers, and sellers.
Assumable Mortgage 101:
Defines what an assumable mortgage is and its value for both buyers and sellers.
Highlights that FHA, VA, and USDA loans are assumable.
Explains that buyers assume the seller's loan, interest rate, and payments, while compensating the seller for equity.
Overcoming Assumption Obstacles:
Discusses the complexity of assumptions, longer closing times, and the need for large down payments, and how Roam mitigates these challenges.
Roam uses its mortgage discovery tool and partnerships to streamline assumptions.
Working with Buyers:
A step-by-step guide on working with buyers interested in assumable mortgages, from finding properties to closing.
Introduces Roam Boost, a second mortgage solution that helps cover the gap between the purchase price and the seller's equity.
Working with Sellers:
Step-by-step guide on marketing and selling a home with an assumable mortgage.
Emphasizes how to stand out by marketing the assumable rate and how Roam provides marketing materials to boost listing views.
45-Day Closing Guarantee:
Roam offers a guarantee that the closing will happen within 45 days, or they will cover the seller's principal and interest payments if delayed.
Frequently Asked Questions:
Covers common questions like "What is an assumable mortgage?", "Can a non-veteran assume a VA loan?", and "Does the seller have liability after the assumption?"
Roam Partner Services:
Details how real estate agents can grow their business by partnering with Roam and leveraging their tools and transaction coordination.
Fee Breakdown:
Explains how Roam's assumption process reduces third-party fees and how assumable mortgages bypass certain fees like appraisals.
Marketing Materials:
Provides resources for agents, such as custom listing banners and flyers to market homes with assumable mortgages.
These sections offer detailed guidance and resources to help agents effectively work with assumable mortgages for both buyers and sellers.