Assuming a mortgage is when you take over somebody else’s mortgage. This is the alternative to taking out a new loan when buying a used home. In many cases, it may also be the most inexpensive way to finance a property.
Find an Assumable Mortgage
In order to assume a mortgage, you first have to start by finding homes that allow for the mortgage to be transferred from one person to another in the first place. It can take quite a bit of work to accomplish this. In most cases, either the owner or the agent will advertise the mortgage on the home can be assumed. There are only two kinds of mortgages that can be transferred from one person to another. They are adjustable rate mortgages and FHA mortgages.
Review the Terms of the Loan
Before any transfer takes place, of course, you should get a hold of all of the terms of the loan. You will need to get a copy of these from the seller. It is absolutely vital that you fully understand the terms before you accept the loan. The last thing that you want is to get a surprise in your bill once you start paying the finance company.
Speak with the Finance Company
The next step is to contact the finance company that is in charge of the loan. You will ask them for what is called an assumption package. This package will contain all of the necessary information that you will need in order to assume the loan. Review all of the details necessary to assume the loan in great depth. In most cases, the lender will require a minimum down payment. They will also require you to submit proof of your income to make sure that it meets their requirements. You will need to pay an assumption fee, which may amount to several hundred dollars, and you will need to satisfy their credit requirements.
Find a Way to Pay the Difference
Take a look at the difference between the selling price of the property and the amount of the loan. The difference between the two will need to be paid in cash, or financed. You can speak with the lender about additional financing. This means that you might need to take out a second mortgage.