Assumable Mortgages 101

Nowadays, the average rate for a conventional 30-year fixed mortgage is 6.5-ish%. This is where an assumable mortgage can help to make the numbers work.

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Government-backed loans (FHA, VA, or USDA) are assumable by a new borrower, as long as the borrower qualifies for the loan.

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For example

We have a listing currently under contract for $669,000, with an assumable VA loan balance of $469,000. The buyer is assuming that $469,000 mortgage at the original interest rate of 3.25%, which amounts to a payment of $2,562 per month. They're bringing the rest as a combination of cash and funds from a HELOC on a separate property.

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One more example

There's a property currently listed for $500,000, and with a loan balance of ~$370,000 (estimating based on origination date), it would require about $130,000 down. If you assume the loan at the 2.83% interest rate, your payment would be ~$1,800/month. If you took out the loan today at 6.94%, same downpayment, you'd be paying ~$2,700/month. If you're a normal person like us, $900/month is a lot of money. Another (kind of bleak) way to look at is at 6.94% interest, you'd be limited to buying a $300,000 property to get down to a $1,800/month payment, and as you well know, $300K doesn't go very far in this real estate market.

 

Opportunity

To help our clients find these opportunities, we've collected data for all assumable mortgages in Larimer County. Every (or every other) week, we'll be combing the MLS for properties that are on this list of homes with assumable loans, and sending these listings out to our sphere. Whether buyers can assume the loans will still depend on a buyer's creditworthiness, along with the seller's cooperation, but in many cases, it's a real win-win. If you're interested in any of the properties we send, drop us a line and we'll talk details and check it out with you.