When considering purchasing a new home, most individuals follow the standard procedure of saving up a down payment, finding a mortgage lender and shopping for a home. If you want to save money while still obtaining the home of your dreams, however, there is an alternative--assuming someone else’s mortgage.
When you assume a mortgage, you take over the current owner’s monthly mortgage payment and have the deed to the home transferred into your name Not only can assuming a mortgage allow you to purchase a home with instant equity, you will be helping someone else escape a mortgage loan that no longer suits his needs.
Start with the Newspaper
Look in the newspaper. Some individuals will advertise that they are actively searching for someone to take over their mortgage loan in the classified section of the newspaper.
Utilize Online Resources
Search online for a mortgage loan to assume. Websites such as TakeList.com give homeowners an outlet to advertise their mortgages to other individuals interested in assuming the loan. You can search by city, state and price range. An added benefit is that many listing also contain photographs--a feature you are unlikely to find in your local newspaper.
Contact a Local Real Estate Agent
Talk to your real estate agent. She may be able to point you in the direction of a homeowner who has been unsuccessful selling his home and may be delighted by the prospect of turning his mortgage over to someone else to avoid foreclosure.
Consider Short Sales
In a short sale, the mortgage lender agrees to permit the homeowner to sell the house for less than the balance of the mortgage loan to avoid a foreclosure. If you come along offering to assume the original mortgage loan, however, the bank gets the assurance that the full balance of the original loan will be paid while the current homeowners get to avoid the negative impact a short sale would have on their credit reports.
Contact Your Local Bank
Call or visit banks in your area and request a list of pre-foreclosure listings. Pre-foreclosures are homes that are scheduled to be sold at a foreclosure auction. With foreclosure imminent, these homeowners may be more than willing to allow you to assume their mortgage to avoid foreclosure.
Depending on the lender, you may have to meet certain credit qualifications and pay a transfer fee before being allowed to assume another individual’s mortgage loan.
Not all mortgages are assumable. If the original mortgage contract possesses a “due on sale” clause, the mortgage loan cannot be assumed.
- FHA Home Loans: Adjustable Rate Mortgages - FHA ARM Loans
- My Mortgage Insider: What Are Assumable Mortgages, And How Can You Get One?
- Consumer Financial Protection Bureau. "What Is Private Mortgage Insurance?" Accessed Oct. 31, 2020.
- Internal Revenue Service. "Publication 936 (2019), Home Mortgage Insurance Deduction." Accessed Oct. 31, 2020.
- Depending on the lender, you may have to meet certain credit qualifications and pay a transfer fee before being allowed to assume another individual's mortgage loan (See References 3).
- Not all mortgages are assumable. If the original mortgage contract possesses a "due on sale" clause, the mortgage loan cannot be assumed.
Ciele Edwards holds a Bachelor of Arts in English and has been a consumer advocate and credit specialist for more than 10 years. She currently works in the real-estate industry as a consumer credit and debt specialist. Edwards has experience working with collections, liens, judgments, bankruptcies, loans and credit law.