Unlock the Secret to Scoring a Dream Home with Assumable Mortgages
As mortgage rates hover around 6%, many would-be homeowners are wistfully reminiscing about the 3% interest rates of 2020 and 2021. But what if you could snag a mortgage rate as low as 2% or 3%? Enter the world of assumable mortgages, where buyers can take over an existing mortgage at its current rate.
A Blast from the Past
Mortgage assumptions were all the rage in the 1970s and 1980s, but largely fell out of favor after the Garn St.-Germain Act of 1982. This legislation allowed private lenders to enforce a due-on-sale clause, requiring payment in full if a property changes hands. However, a specific subset of mortgages remains assumable: those backed by the Veterans Affairs, Federal Housing Administration, and United States Department of Agriculture.
The Hidden Opportunity
According to Raunaq Singh, CEO of Roam, “Twenty percent to 25% of the homes on the market will be fully assumable at one time.” Yet, the number of assumption transactions is significantly lower than the number of mortgages that can be assumed. In 2023, only 4,052 FHA-backed mortgage assumptions were completed, although this represents a 59% increase compared to 2021. The VA has seen an even more dramatic surge, with 713% more mortgage assumptions in 2023 compared to 2021.
Why Assumable Mortgages Matter
Both the VA and FHA are on track to surpass last year’s assumption totals, with over 5,000 assumptions per department so far in 2024. This trend is significant, as it offers buyers a chance to secure lower mortgage rates in a rising interest rate environment.
Navigating the Challenges
While assumable mortgages present an attractive opportunity, they also come with their own set of hurdles. Watch the video above to learn more about how they work and the potential obstacles you may face.
By understanding the ins and outs of assumable mortgages, you could unlock the door to your dream home at a fraction of the cost. So, don’t let rising mortgage rates hold you back – explore the world of assumable mortgages today!
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