How to Assume a Home Loan

By Larry Parr

When you assume a seller's loan, you simply take over the seller's existing loan and make the same payments the seller was making, under all of the same terms and conditions. This can be a benefit to a new buyer, especially if the assumable loan is at a lower interest rate than a buyer could get today. Not all mortgages are assumable. However, when you are looking at properties, the seller will almost always advertise the fact if they have an assumable loan.

Locate a property that you wish to buy which has an assumable loan.

Get copies of the loan documentation from the seller. Review the terms and conditions of the existing loan and make certain you still wish to assume the loan.

Contact the lender and request a "loan assumption package."

Fill out the loan assumption package. You will be asked to provide your financial and credit background information, make a down payment for the property, and pay a loan assumption fee. Although the requirements for assuming a loan are sometimes not quite as strict as the requirements for obtaining a new loan, lenders still need to assure themselves that you are a viable credit risk before they let you take over the payments on a mortgage loan.

Send in all paperwork and fees. If the cost of the property is greater than the amount due on the mortgage you are assuming, you will need to make up the difference either in cash or by arranging for a second mortgage.

Lenders are becoming pickier about the credit history and financial stability of persons assuming loans, so unless the existing loan has a particularly good interest rate, assuming a mortgage may or may not be your best alternative.

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