Assumable mortgages: how to take over a seller’s low rate

For a while I assumed this was a niche trick, the kind of thing that works once in a while for someone with an unusual lender. It isn’t. It’s written into federal rules for three of the most common loan types, and plenty of FHA and VA loans written in 2020 and 2021, when rates were near historic lows, are still being paid off in houses around here.

The idea is simple. Instead of getting a new mortgage at today’s rate, the buyer takes over the seller’s existing loan, with its rate, balance and remaining term. With the 30-year average at 7.40% (Freddie Mac, October 15, 2026), a loan from a few years ago can be worth more than anything in the kitchen.

What it’s worth, in a monthly number

A rough illustration: a $400,000 loan at 3% has a principal-and-interest payment of about $1,690 a month. The same $400,000 at 7.40% is about $2,770. That’s roughly $1,080 a month, every month, for the same house. The real numbers depend on the actual loan’s remaining term and balance, but the size of the gap is the point.

Which loans can be assumed

• FHA: most can be, with the lender’s approval.
• VA: yes, and the buyer doesn’t have to be a veteran.
• USDA: yes, under the program’s eligibility rules, sometimes at the original terms and sometimes at new ones.
• Conventional: generally no. Almost all carry a due-on-sale clause, which lets the lender call the loan when the house sells.

So the first question about any listing is simply: what kind of loan does the seller have, and at what rate?

The catch: the equity gap

You take over the loan balance, not the purchase price. If a house sells for $500,000 and the seller owes $400,000, you need to cover the other $100,000 yourself, in cash or with a second loan. The Consumer Financial Protection Bureau notes that finding a lender for that second loan can be difficult, which is why assumptions tend to work best for buyers with substantial savings, or on homes where the seller has owned only a few years and the gap is smaller.

FHA assumptions: the rules that matter

• The buyer has to qualify. The lender reviews creditworthiness, much like a new loan.
• The buyer has to live there. For FHA loans insured since December 15, 1989, the person assuming must occupy the home as a principal residence. An investor generally can’t assume an FHA loan to rent it out.
• The seller should be released. When a creditworthy buyer assumes, the lender signs HUD form 92210.1, “Approval of Purchaser and Release of Seller.” Without it, the seller can stay liable for a loan on a house they no longer own.
• Fees are capped. HUD caps the lender’s assumption processing fee at $1,800 for loans with case numbers assigned since August 19, 2024 (older loans were capped at $900).

VA assumptions: different, and in some ways easier

• Anyone can assume, veteran or not, if the loan is current and the buyer is creditworthy and takes on full liability.
• The seller’s entitlement stays with the loan unless the buyer is a veteran who substitutes their own. For a veteran seller, that can limit their next VA loan, so it’s worth understanding before agreeing.
• The VA funding fee is 0.5% of the loan balance for an assumption, paid at closing, unless the buyer is exempt. Processing fees are capped at $300 (or $250 when VA must approve).
• Timeline: a servicer with automatic authority has up to 45 days after a complete application to decide.

Plan for a longer escrow

Assumptions run through the loan servicer, not a lender competing for your business, and they take longer than a standard 30-day close. Build that into the contract and the move. It’s worth asking the servicer early for its process, fee and timeline in writing.

If you’re a seller with an FHA or VA loan

Your loan may be one of the most valuable things about your house, and you probably haven’t been told. A buyer saving a thousand dollars a month has a concrete reason to pay your price. Before it goes anywhere near the marketing, though, confirm with your servicer in writing that the loan is assumable and what the process is, and make sure any deal includes a formal release of liability.

If you’re a buyer

Ask about the loan on every house you’re serious about, especially anything bought from 2020 to 2022 with FHA or VA financing. Run the payment both ways, as an assumption and as a new loan, with the equity gap included. My true monthly cost calculator and rate buydown sheet are good places to start.

This is general information, not lending, legal or tax advice. Loan figures are illustrations, not quotes. Whether a specific loan can be assumed, and on what terms, is decided by the servicer under FHA, VA or USDA rules; confirm in writing with the servicer and a licensed loan officer before relying on it. Tye Moody is a real estate agent, not a lender.