What is an Assumable Mortgage?

Published by julia | Filed under Buyer / Seller Tips, Market Trends, Miscellaneous, Pinellas County Homes, Real Estate

What is an assumable mortgage? In this economy, with buying and selling houses being so difficult, many people are starting to ask this question as they gradually hear about different ways they can get (or get rid of) a house. In many cases, an assumable mortgage can be a lifesaver for both buyer and seller, as it allows the seller to get out of the mortgage commitment with no fees, and lets the seller buy the house without having to qualify for a new mortgage. It can really be a winning proposition for anyone in the real estate game.

Basically, an assumable mortgage is one in which the buyer takes over the seller’s existing mortgage. If the mortgage was taken out before 1989, the buyer can simply take over the payments on the seller’s house and does not have to qualify for any type of new mortgage. However, the original mortgage remains in the seller’s name, so if the buyer defaults, it will affect the seller’s credit. If the loan was taken out after 1989, then the assumable mortgage becomes a kind of refinance, where you keep all the original terms (including interest rate) of the seller’s original mortgage, but a new mortgage with those terms is issued in your name and you still have to qualify for it just like you would a regular home loan.

Essentially, if you can find a house for sale with an assumable mortgage that was taken out before 1989, then you should have no problem at all getting the house if the seller is agreeable. This can be a real blessing for people who have poor credit and can not qualify for a mortgage on their own. If the mortgage was taken out after 1989, then you still need to have good credit to get the bank to let you take over the terms of the original mortgage. Don’t worry, though. If you really want an assumable mortgage and have poor credit, you can look through the property records for your town online or at your local court house to find homes with mortgages taken out prior to 1989. If these houses are for sale, you should feel free to put in an offer, because you could end up with a really great deal and the house of your dreams with no qualifying.