The new sale incentive for 2020: Assumable Mortgage

[BoBromhal]

Originally Posted by SmartMoney

Sure, a bad thing for an investor. But FHA was actually created as an affordability vehicle for homebuyers of low to moderate income, so they could enjoy the benefits of home ownership. Investors were initially included in the 1980's FHa when investors had to put 15% down, but they were quickly removed when homeownership availability became a crisis. When the assumability changes were later written into FHA guidelines requiring the new buyer to qualify, investors were eliminated altogether.

Eliminating investors only brought the objections of investors. Realtors working with frustrated buyers being beat out by investors didn't object. Some of the first time buyers are stumbling across deals with very little down and rates well below 5%. I am happy to see someone is exploring an ignored seller advantage.

I have no idea why we would ever be giving government-backed low-down loans to investors.

[SmartMoney]

Originally Posted by MikeJaquish

Is loan assumption easy for both parties?

1. Does the seller with an FHA assumable mortgage get free of all obligation for the note when allowing assumption?

I.e., a buyer assumes the mortgage, and in 2 years falls on hard times and cannot cover the payment.
Is the original owner still on the hook?


2. Is it plausible for there to be a buyer pool to pick up that 3.25% rate on assumption, if the buyer will have to buy out equity at 20%--30% of the property value due to pay down of principal or appreciation?

1 & 2 - and the only reason I know this is from the plethora of HUD forms signed at application - if the new buyer executes Release of Liabilty, the seller is off the hook. If not, the seller could be liable for up to 60 months. Another good readon for Realtors to understand assumptions.

3 - the new buyer could also use a heloc to meet the difference in sales price and loan balance. The seller can also hold a note. Terms of assumption thru the years have changed, just as the MI has changed. If the date of the Note is known, the terms can be easily looked up.

[MikeJaquish]

Originally Posted by SmartMoney

1 & 2 - and the only reason I know this is from the plethora of HUD forms signed at application - if the new buyer executes Release of Liabilty, the seller is off the hook. If not, the seller could be liable for up to 60 months. Another good readon for Realtors to understand assumptions.

3 - the new buyer could also use a heloc to meet the difference in sales price and loan balance. The seller can also hold a note. Terms of assumption thru the years have changed, just as the MI has changed. If the date of the Note is known, the terms can be easily looked up.

Good reason for both buyer and seller to have legal counsel in an assumption transaction.