"Be very selective of whom you consent to assume your mortgage and do plenty of research into all other options as well so that you can make an educated decision regarding whether an assumption is worth pursuing." ~ Veterans United Network
Minneapolis, Minnesota (PRWEB) September 21, 2013
In a rising rate housing market, assumability may make a home purchase affordable. A VA mortgage assumption is generally defined as "a purchase transaction where the purchaser takes over the liability of an existing mortgage from the seller", according to a recent article published by the Veterans United Network. Home sellers amazed by VA and FHA mortgage assumption opportunities are learning that it may give them an additional marketing advantage.
"We find that Twin Cities house sellers are often surprised to learn that a mortgage insured by the Federal Housing Administration (FHA) or the Department of Veterans Affairs (VA) could be inherited." says Jenna Thuening, owner of Home Destination. "That means that if the real estate seller has an FHA or VA home loan with terms including a remarkably low interest rate, one could market the home letting prospective home buyers know they may be able to assume the mortgage loan."
Qualifying home buyers can assume an existing FHA-insured loan, according to U.S. Department of Housing and Urban Development (HUD). Conversely, a home seller may allow a buyer to assume their FHA or VA loan. "Assuming a loan can be very beneficial, since the process is streamlined and less expensive compared to that for a new loan. Also, assuming a loan can often result in a lower interest rate. The application process consists basically of a credit check and no property appraisal is required. And you must demonstrate that you have enough income to support the mortgage loan. In this way, qualifying to assume a loan is similar to the qualification requirements for a new one," states HUD's website.
"Home sellers need awareness that VA mortgage assumptions have time constraints, adds Thuening. According to a recent article in the New York Times and HUD, VA loans that closed before March 1, 1988, may be assumed without approval from the VA or the lender. Applicants who wish to assume VA loans closed after March 1, 1988, must be approved by the Department of Veterans Affairs or its authorized agent.
Home Destination Points Out Additional Advantages of Selling Assumable FHA or VA Home Loans
1. The home buyer incurs fewer settlement fees at the home closing as well; which makes assuming a low interest rate loan even cheaper. Home Destination recommends that all buyers obtain a home appraisal, even though in this case it is not mandated as in a traditional home sale. Some buyers opt our of it when not required to have one.
2. When assuming a loan, borrowers do not have to pay the upfront mortgage insurance premium required on a new loan. However, assumable F.H.A. home loans still require the borrower covers costs for mortgage insurance over the life of the loan.
3. In some states, borrowers assuming a loan do not have to pay the hefty mortgage recording tax a second time.
The Veterans United Network Cautions That There Are Disadvantages Too:
1. The home sellers entitlement is tied to the buyer for the life of the loan. The seller is dependent on possible poor decisions or financial hardships on the buyers part that can negatively impact the sellers eligibility.
2. Should the home someday end up in foreclosure, the seller may have to pay restitution on all or a portion of the losses to reinstate their entitlement.
3. The same is true if the buyer who assumes the loan ends up in a short sale or bankruptcy.
"We came across more FHA loans that were assumable in the past. However, interest rate increases seem to have brought the topic forward more as one opportunity for home sellers. Many are quite amazed to learn it may be a option that could work favorably on their behalf," adds Thuening. If the interested home buyer can manage the needed down payment and qualify for the loan assumption, both seller and buyer could find it to be a huge benefit.
Home Destination works to ensure that Twin Cities sellers seeking to sell an assumable FHA or VA home loan have their best options brought forward. Call 612-396-7832 to reach Jenna Thuening for processional guidance to sell your home and gain the best results.