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How Long Does It Take to Assume a Mortgage? Complete Guide

Updated: Oct 28

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In today's competitive housing market, homebuyers are constantly looking for ways to secure more favorable mortgage rates. One of the lesser-known but increasingly attractive methods is mortgage assumption. If you're wondering, "how long does it take to assume a mortgage?" you're in the right place.


While mortgage assumption can be a great financial strategy, it comes with its own process and timeline. In this guide, we’ll explore the benefits, challenges, and steps involved in mortgage assumption, providing a complete understanding of how long it takes to assume a mortgage and what the entire process entails.


What Is a Mortgage Assumption?


A mortgage assumption occurs when a buyer takes over the seller's existing mortgage instead of getting a new loan. This allows the buyer to take on the same loan terms, including the interest rate, as the original borrower.


For homebuyers, this can be a significant financial advantage, especially if the original mortgage has a lower interest rate than what’s available in the current market. But what is an assumable mortgage, exactly?


It’s an agreement where the buyer agrees to assume financial responsibility for the remaining balance of the loan, often bypassing some of the typical costs associated with a new mortgage.



How Does an Assumable Mortgage Work?

When you assume a mortgage, you essentially step into the shoes of the original borrower. The existing loan, including its interest rate, loan term, and repayment schedule, is transferred to you, meaning you inherit the debt but under the same terms.


However, there’s more to the process than simply signing paperwork. You’ll need approval from the lender, who will evaluate your financial status—credit score, income, and debt-to-income ratio—just like they would for any new loan.


The biggest appeal of an assumable mortgage is the potential for a lower interest rate. If market rates have increased since the original loan was issued, assuming the seller’s mortgage could save you a significant amount of money over time. This can make an assumable loan a highly attractive option in high-rate environments.


Are FHA Loans Assumable?

Yes, FHA loans are assumable, and they’re one of the more common types of mortgages that allow assumption.


FHA assumable loans are often sought after because they make homeownership more accessible to buyers with less-than-perfect credit. If you qualify to assume an FHA loan, you may be able to avoid some of the stricter lending standards required by conventional loans.


However, while assuming an FHA mortgage can be advantageous, it’s not always straightforward. The lender still needs to approve you as the new borrower, and you’ll be required to meet certain financial criteria, like having a minimum credit score of 580 and a debt-to-income ratio of 43% or less.


The good news is that FHA loans issued before December 1, 1986, are "freely assumable," meaning they come with fewer restrictions, making them even more appealing.


Assuming a VA Mortgage

A VA mortgage is another government-backed loan that can be assumed by a new borrower. Assuming a VA mortgage can be highly beneficial for veterans and eligible non-veterans alike, as VA loans often come with competitive interest rates and no down payment requirements.


However, if you’re not a veteran, you may not be able to substitute your entitlement for the seller’s, meaning the seller’s VA loan benefits will remain tied up until the loan is paid off.


Like with FHA loans, assuming a VA loan requires lender approval. You’ll need to prove your financial stability, creditworthiness, and ability to continue making mortgage payments.


How long does it take to assume a VA loan? The process can take anywhere from 45 to 60 days, depending on the lender and how quickly you can provide the necessary financial documentation.



How to Assume a Mortgage

Now that we understand the basics, the next question is: How do you assume a mortgage? 

The process of assuming a mortgage is similar to applying for a new loan, but with some distinct differences.


First and foremost, not all mortgages are assumable, so the first step is to verify that the loan in question can actually be assumed.


Steps to Assuming a Mortgage

The process begins with identifying a home that has an assumable mortgage. Once you’ve found a property and agreed with the seller to assume the loan, both you and the seller will need to approach the lender to start the assumption process.


  1. Confirm the Loan’s Assumability: Not all loans are assumable. Before moving forward, make sure the existing mortgage qualifies.

  2. Submit Your Financial Documents: Just like when applying for a new mortgage, the lender will require financial documentation to ensure you can handle the mortgage payments. This includes credit reports, pay stubs, and tax returns.

  3. Pay an Assumption Fee: Most lenders will charge an assumption fee, which typically ranges from $500 to $1,000, depending on the lender and loan type.

  4. Get Approved by the Lender: The lender will evaluate your financial qualifications and decide whether or not to approve the assumption.

  5. Close on the Loan: Once approved, you’ll need to sign the necessary paperwork, and the loan will officially transfer into your name.


How Long Does It Take to Assume a Mortgage?

The timeline for assuming a mortgage can vary but generally takes between 45 and 90 days.


How long does it take to assume a mortgage? depends on several factors, including the efficiency of the lender, the complexity of the loan, and how quickly you can provide the required documentation.


Lenders are often thorough in their assessments because the new borrower is essentially stepping into the shoes of the original borrower, inheriting not only the loan but also the associated risks.


It’s crucial to be prepared with all necessary paperwork to avoid delays and ensure the process moves as smoothly as possible.



Assumable Mortgages: Pros and Cons


Before jumping into the assumption process, it’s important to weigh the pros and cons of assuming a mortgage. While there are many advantages, such as saving on interest rates and closing costs, there are also potential challenges.


Pros of Assuming a Mortgage

One of the most significant benefits of assuming a mortgage is the potential to lock in a lower interest rate. If the seller secured their loan at a time when rates were lower, you can step into that more favorable rate and save thousands over the life of the loan.


Additionally, closing costs are often lower with an assumable loan since you’re not originating a new mortgage.


Another perk is the shorter loan term. Since you’re taking over an existing mortgage, you’ll inherit the remaining term rather than starting from scratch. This could mean fewer years of payments compared to taking out a new 30-year mortgage.


Cons of Assuming a Mortgage

Despite the benefits, there are some drawbacks to assumable mortgages. The biggest challenge is often the down payment. If the seller has built up significant equity in the home, you’ll need to cover that difference in cash or through a second mortgage, which can be costly.


Additionally, not all loans are assumable, and those that are might require a more stringent approval process. Lenders need to ensure the new borrower is just as capable of handling the mortgage payments as the original borrower.



Mortgage Assumption in Family Transfers


Many homebuyers wonder, can you assume a mortgage from a family member? The short answer is yes, but the process can still be complex and requires lender involvement.


Whether you’re taking over your parents’ mortgage or buying a home from another relative, the lender will still require financial verification to ensure you can handle the payments.


How to Assume a Mortgage from a Family Member

If you’re planning to assume a mortgage from a family member, the steps are similar to any other mortgage assumption.


You’ll need to contact the lender and initiate the assumption process. The lender will review your financials just as they would with any other buyer to ensure you can continue making payments on the loan.


The benefit of assuming a mortgage from a family member is that you may be able to negotiate better terms, such as a lower down payment or a more flexible timeline for the assumption.



Mortgage Assumptions During Divorce


Divorce can be a complicated and emotional time, and the family home is often a key asset that needs to be divided. One option is assuming the mortgage during a divorce, allowing one spouse to remain in the home while the other is released from the loan.


How Does a Mortgage Assumption Work in Divorce?

When one spouse assumes the mortgage, they must qualify for the loan based on their individual income, credit, and financial situation.


This process involves working with the lender to transfer the loan solely into one spouse's name, releasing the other from any financial responsibility.


This can be a practical solution, but it requires approval from the lender, who will want to ensure the remaining spouse can handle the mortgage payments on their own.


How Long Does It Take to Assume a Mortgage in Divorce?


Just like a traditional mortgage assumption, how long does it take to assume a mortgage in divorce depends on various factors, including the lender's review process and the financial readiness of the assuming spouse. Typically, this process takes around 45 to 90 days.


Restrictions on Mortgage Assumptions


Mortgage assumptions come with restrictions, primarily from the lender. Not all mortgages can be assumed, and the lender will have the final say on whether you qualify to take over the loan.


What Mortgages Are Assumable?

The most common types of assumable mortgages are FHA, VA, and USDA loans. These government-backed loans offer more flexibility in terms of assumption.


However, are conventional loans assumable? In most cases, the answer is no, unless specified in the loan contract.


Alternatives to Mortgage Assumptions


If mortgage assumption isn’t an option, there are other ways to take over a mortgage. One alternative is refinancing, which allows you to pay off the existing mortgage and secure a new loan in your name.


Refinancing vs. Assumption

Refinancing involves taking out a new mortgage to pay off the old one, while assumable loans allow you to take over the seller’s existing loan without altering the original terms.


While refinancing might offer more flexibility, it often comes with higher closing costs and may not offer the same interest rate benefits as an assumption.



Tax Implications of Assuming a Mortgage


One of the often-overlooked aspects of assuming a mortgage is the tax implications. When you assume a loan, you may be able to deduct mortgage interest payments on your tax return, just like you would with a new mortgage.


However, there are nuances to consider, especially in cases involving property inheritance or divorce.


It’s a good idea to consult with a tax professional to fully understand the tax implications of assuming a mortgage.


Final Thoughts on Assuming a Mortgage


Assuming a mortgage can be a valuable financial move, particularly when interest rates are high. However, the process is not without its challenges.


From navigating lender approval to covering the down payment, it’s important to understand the ins and outs of the mortgage assumption process.


Whether you’re looking to assume a mortgage from a family member or take over a loan during a divorce, the process generally takes between 45 to 90 days. By understanding the timeline and requirements, you can make a more informed decision.


FAQs


1. Can I assume a mortgage from my parents? Yes, assuming a mortgage from a family member is possible, but it requires lender approval. The lender will evaluate your financial status to ensure you can continue making payments.


2. How do assumable mortgages work? Assumable mortgages allow a new borrower to take over the seller’s existing mortgage with the same terms, including interest rate and loan length, pending lender approval.


3. Are all FHA loans assumable? Yes, all FHA loans are assumable, but the new borrower must meet the lender’s financial requirements to be approved for the assumption.


4. What are the downsides to assuming a mortgage? The biggest downside is the potential need for a large down payment to cover the seller’s equity. Additionally, not all loans are assumable, and lender approval is required.


5. How long does a mortgage assumption take? On average, a mortgage assumption takes between 45 and 90 days, depending on the lender and the borrower’s financial situation.

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Agecroft Capital does not provide tax, investment, or financial advice. Always seek the help of a licensed financial professional before taking action.

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