What is an Assumable Mortgage?

Assumable Mortgages Guide: Buying a Home With USDA, FHA, and VA Loans

What is an Assumable Mortgage?

In the current market value where interest rates due higher than they have been in the past few years. An assumable mortgage is a financial arrangement where an outstanding mortgage and all terms are then transferred from the seller, and current owner, to the buyer and are more attractive. When buying a house, many homebuyers will take out a mortgage to finance the purchase of the property, if a buyer assumes the mortgage, they can possibly assume the current principal balance, interest rate, repayment period, and other terms of the seller’s mortgage. This can be an advantage to both parties as it will allow the buyer to take on the mortgage without the going through the painstaking process of obtaining a home loan through a bank, while the seller might be able to sell the house for more as interest rate’s may be lower from when the house was originally purchased, thus becoming more attractive for the buyer to purchase.


What Types of Loans Are Assumable?

FHA Loans
FHA Loans can be assumed, but only under certain circumstances. Both parties must meet the requirements for the assumption to be valid. For example, the seller must have used the property as their primary residence. If you are the buyer, the first step is to confirm that the FHA loan is assumable. If so, you can apply for it, just like a regular FHA loan. The seller’s lender will assess your creditworthiness and other qualifications. If you meet the criteria, you can assume the mortgage. Keep in mind, however, that until the seller is released from the loan, they are still responsible for it.

VA Loans
The Department of Veterans Affairs provides mortgages to eligible military members and their spouses. However, it is not mandatory to be a military member to be qualified for a VA loan assumption. Approval from the lender and the regional VA loan office is required for the assumption, and it’s more likely that military members are the ones assuming VA loans.
If the loan was initiated before March 1, 1988, the buyer can assume the VA loan without the need for approval from the VA or the lender.

The United States Department of Agriculture (USDA) offers loans to individuals looking to purchase rural properties. These loans are attractive due to their low interest rates and zero down payment requirement. However, assuming a USDA loan requires the fulfillment of specific qualifications such as meeting credit and income requirements, as well as receiving approval from the USDA to transfer title. It is possible to either retain the existing rate of interest and loan terms or opt for new rates and terms. Unfortunately, assuming a USDA loan is not possible if the seller is delinquent on payments, even if you meet all requirements and receive approval.


Before the deal can be finalized, the lender of the original mortgage must approve the mortgage assumption. The homebuyer is responsible for applying for the assumable loan and meeting the lender’s requirements, such as demonstrating sufficient assets and creditworthiness. Once approval is granted, the buyer receives title of the property and is required to make monthly repayments to the bank. If the lender doesn’t approve the transfer, the seller must seek out another buyer who is willing to assume the mortgage and has good credit.