- January 10, 2008 at 5:09 pm #255111
There are different types of assumable loans. An FHA non-qualifying assumable loan is a type that is no longer offered, but can still be found if a homeowner has not refinanced and is still carrying the original loan of this type. (I know, because I have this type of original mortgage loan). With a non-qualifying assumable loan, the original homeowner must guarantee the loan assumption for a period of 2 years. If the new owner defaults within this timeframe, the original owner has the option of curing the default and retaking possession of the home and can resell it at a later date again. The new owner must be willing to buy out the existing equity of the original homeowner and then assumes the balance of the existing loan at whatever interest rate the original loan was taken out at. The advantage to the new homeownerwho assumes the
loan is that they do not have to go through the process of qualifying if they have less than perfect credit. The disadvantage is that they need to be able to come up with enough money or another loan source to be able to pay the original owner/noteholder their equity before moving in. If the assumable loan is the newer type that requires income and credit qualification, I don’t see much advantage unless the interest rate is lower than the current market interest rate or you can assume the note in a distress circumstance at a very lowdownpayment to equity ratio. Good luck, Tressa!
wrote: Need help…
My boyfreind and I found a house we really want…I was approved with my income only since he is a full time student at 7.5% interest with $40,000 down as not to pay PMI. (I have a few dings on my credit score I am trying to fix) We found out that the home has an assumable loan and the seller is interested in this also..they are in a fix …lost job etc and need to get out of high payment. This home has a 5.65% rate.
Do you think if I have dings on my credit that they will let us assume the loan? Our payments will not be much different then if we put down the $40,000 with the 7.5% interest rate. We will be able to put the $40,000 in the bank until boyfriend is done with school (for a nice buffer) it happens to be with the same bank that our home loan is with now. If we are able
to assume the loan we can keep our current property as we have already had 2 people ask if they can rent it…and then sell when the market is a little better…(although our area isnt hit hard) or we wont have to settle for less if we leave on market longer..(will sell better in spring/summer with nice yard and inground swimming pool)
Any suggestions? I am not sure what to do..I really want this house!!!! advice would be greatly appreciated!
Tressa in Washington
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