Mortgage Resources | Assumable Loans
Q: How do you find out if a loan is assumable?
A: Look to the loan agreement to determine if it is assumable by someone else. Then talk to the lender about specific requirements based on the value of the home.
Assumable loans permit one borrower to take over a loan from another borrower without any change in the loan terms. Such loans still exist but they aren't very common or popular (for buyers) in a low-interest-rate environment. Plus, today new assumable loans are almost always adjustable rate mortgages.
Q: Are FHA loans assumable?
A: Lenders will only permit those loans that have a "subject to transfer" clause to be taken over through a formal assumption process. Look to your loan agreement for specific terms. In addition, you should candidly discuss any risks with your lender, and possibly consult an attorney before signing the final agreement.
Q: What is a wrap-around loan?
A: This method of seller financing is risky if the underlying first loan has a "due on sale" clause because the loan might be called due when the first lender becomes aware that the property has transferred title Sellers prefer to have a due-on-sale provision included in the note, but this can be a negotiable.