Buying or selling? Check for an assumable loan
Millions of homeowners are sitting on low-rate FHA, VA and USDA loans that a buyer can take over. If you're selling, that loan can be one of your home's best features. If you're buying, it can be a path to a lower rate than today's market. Here's what I shared with agents at this week's sales meeting.
Sources: ICE Mortgage Monitor; Roam Assumable Mortgage Index (June 2026).
What is an assumable loan?
With an assumption, the buyer takes over the seller's existing mortgage: same rate, same remaining balance, same remaining term. Instead of getting a brand-new loan at today's rates, the buyer steps into the seller's loan. Many of these loans were made when rates were far lower than they are now, so the savings can be real.
The buyer still has to qualify. The seller's loan servicer reviews the buyer's credit, income and debt, much like a regular approval.
Which loans can be assumed?
- Buyer qualifies with the servicer
- Must be the buyer's primary home
- FHA mortgage insurance stays with the loan
- Servicer assumption fee capped at $1,800
- The buyer does not have to be a veteran
- 0.5% VA funding fee on the loan balance
- Seller's VA entitlement stays tied up unless a veteran buyer substitutes theirs
- Buyer must meet USDA income limits
- Home must be in an eligible area
- Least common of the three
Most conventional loans are not assumable. Fannie Mae and Freddie Mac loans have a due-on-sale clause, with narrow exceptions like a death or divorce.
The equity gap: where most deals stall
The buyer doesn't just take over the loan. They also have to pay the seller for their equity, the difference between the price and what's left on the mortgage. Here's a simple example.
| Purchase price | $400,000 |
| Seller's remaining loan balance | − $250,000 |
| Equity gap to cover | $150,000 |
| How it could be covered | |
| Buyer's down payment (10% of price) | $40,000 |
| Second mortgage | $110,000 |
Very few buyers have six figures in cash. A second mortgage can bridge the difference. The assumed loan stays in first position and the new loan sits behind it. The buyer qualifies on both payments, and most second-lien lenders cap the combined loan-to-value around 80–90%, so some down payment is still needed.
The bigger the low-rate loan is compared with the second mortgage, the better the deal tends to be. That's why I like to run the numbers before an offer goes in.
Example for illustration only. It is not an offer of credit or a commitment to lend. Actual terms depend on the buyer's credit, the property and the lenders involved.
How the process works
- Confirm it's assumableLoan type, servicer and balance come from the seller's mortgage statement.
- Run the gap mathPrice minus balance tells us the gap. Get the buyer prequalified for the second.
- Write the contractInclude an assumption contingency and a realistic 60–90 day close.
- Submit the packageThe buyer applies with the seller's servicer, not a new lender.
- Servicer reviewsCredit, income and debt. VA expects a decision within 45 days of a complete package.
- CloseAssumption agreement, the seller's release of liability, and the second mortgage records.
Plan on 45–90+ days. The seller's servicer, not the buyer's lender, controls the timeline.
Why it matters to you
If you're selling
- Find out if your loan is FHA, VA or USDA. It's on your mortgage statement.
- A low-rate assumable loan can set your home apart. Ask your agent to mention it in the listing.
- Selling with a VA loan? Talk through your entitlement before you list.
- Make sure you get a release of liability at closing.
If you're buying
- Ask your agent to look for FHA and VA listings in your price range.
- Call me before you write an offer so we know the gap and how to cover it.
- Expect a longer close than a regular purchase.
- Line up the second mortgage at the same time as the assumption.
Have a home where an assumption might fit?
Buyers, sellers and agents: send it my way and I'll run the numbers with you.