7 Reasons for FHA Assumptions - 9/25/2011
FHA loans that originated with lower interest rates have great advantages for buyers and sellers.
- Interest rate won't change for qualified buyer
- Lower interest rate means lower payments
- Lower closing costs than originating a new mortgage
- Easier to qualify for an assumption than a new loan
- Lower interest rate loans amortize faster than higher ones
- Equity grows faster because loan is further along the amortization schedule
- Assumable mortgage could make the home more marketable
Any FHA lender can approve a buyer for the assumption of an existing FHA mortgage but the most likely place to start would be the current note holder. The seller may have acquired a loan information letter that will verify that the mortgage is an FHA loan, the rate, the unpaid balance and how to make application for approval.
Approving the new buyer on the assumption will allow the seller to receive a release of liability on the loan. This will eliminate the possibility of further financial responsibility if the buyer doesn't continue to make the payments.