In today's mortgage market, assuming a loan is not something that regularly goes on. However, there are cases where you will be able to assume a loan if you want to. Here are the basics of assuming a loan and how the process works.

Assuming a Loan

The basic idea behind assuming a loan is that you are going to take over another individual's mortgage. You are going to put your name on the mortgage and start making their mortgage payment for them. You will not have to set up a new loan with a mortgage lender under this arrangement.

Assumable Loans

The reason that this type of transaction does not occur very often is because fewer and fewer mortgages are offering this as an option. Some VA loans offer the option to assume them. However, most traditional mortgages today do not have this feature.

The Process

First of all, you will have to locate a seller that has an assumable mortgage. Once you locate someone, you will need to negotiate a purchase price for the house. With this type of arrangement, you are going to have to reimburse the original owner of the property for the equity that they have accumulated. This means that you are going to have to come up with a larger amount of cash in order to make this work. You will have to pay them for their equity as well as any appreciation in the property.

Once you have agreed on the purchase price, you will have to talk with the mortgage lender. Even though you do not necessarily have to set up a new mortgage with them, you are going to have to transfer your name on to the mortgage. In order to do this, you will have to be evaluated for credit worthiness. The bank is going to look at your credit and determine if they want you to take over the loan. They are also most likely going to look at your employment situation and determine if you make enough money to support the payments.


One of the major benefits of assuming a loan is that you can avoid large amounts of closing costs. Since you are not actually setting up a new mortgage, you will not have to go through a traditional closing with a mortgage lender. Since closing costs usually run many thousands of dollars, this can be a significant source of savings for you.

Another potential advantage of assuming a loan is that you could take advantage of a lower interest rate. If the interest rate on the mortgage is lower than what is currently available in the market, you will be able to take over this interest rate. This means that you might be able to get a smaller monthly mortgage payment than what you would be able to if you purchased the house with a new mortgage. Since you are taking over the mortgage after several years, it will not take as long to pay off the property either.


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