Assumable Loan Rates Starting at 2%, A Home Buyer’s New Best Friend
Soaring mortgages rates are causing the recent real estate market slowdown. These high rates, by in large, are the only reason for the housing slump. Inventory is still relatively low compared to prior years, and prices are actively dropping. Despite the new lower home prices, sales are still way down due to the cost of a new mortgage today.
However, did you know it is possible for a homebuyer today to assume the seller’s loan and get that seller’s fantastic mortgage rate, no matter how low that interest rate might be? It is a true and present possibility. We’ll show you how.
Only Certain Homes Have Assumable Loans
Given all of the homes on the market today, only a portion (say 15-20%) will have assumable loans. By in large, these are homes that were previously purchased with an FHA or VA loan (government backed loan).
Assumable Loan Examples
Here’s an amazing option for a property for sale (right now) in Portland:
Lovely remodeled waterfront condo with a balcony and river view. Two bed, one bath. Likely would have sold spring 2022 for 350K. Currently priced at 279,000 with an assumable VA loan. Current seller balance, 249,000. Current seller loan rate, 4.25%. So if a home buyer made an offer at 279,000 they would have to bring the remainder (less than 10% down) in cash (30,000) and then could assume the seller’s loan (they have to get approved with the seller’s lender) at $249,000 at a fantastic (for today’s rates) 4.25%.
The buyer can assume the seller’s VA loan without being a veteran or serving in the military. The process of getting approved to assume the seller’s lender is not more difficult then getting approved for any other loan type with a different lender.
How Can You Find Homes for Sale with Assumable Loans?
It is not easy, (but we can send them all to you). Most public home search portals don’t have a way to filter homes for sale with assumable loans. But thankfully our local MLS, RMLS, does allow its members (mostly Realtors) to search only for homes with assumable loans. This means your local real estate agent in the greater Portland, Oregon real estate market can exclusively send you homes for sale with assumable loans. We highly recommend our top 1% buyer’s agents that have helped hundreds of local homebuyers find their next property in and around Portland. Our team is led by Kami Price, licensed since 2004. Give her office a call today at 503-773-0000 or chat with the bot on this site. Her team is ready to send you a list of homes that matches your criteria with assumable loans.
When do Assumable Loans Not Work for a Homebuyer?
Let’s say the homebuyer is interested in a property for sale for $400,000 with an assumable FHA loan at a fantastic 2% rate. However, the seller’s FHA loan balance is only $100,000. The homebuyer has two options to assume the loan, neither of which are likely to work. First, the homebuyer could bring in the balance of $300,000 and assume the $100,000 loan at 2%, but unfortunately most buyers do not have that much cash. Second, the homebuyer could obtain a second loan on the $300,000. Unfortunately though, since that would be a non-standard loan, the rates are likely to be even higher than today’s market rates. At the end of the day a $300,000 loan at 14% interest (non-standard loan example) plus a 2% rate at $100,000 balance is not better than a $400,000 loan with a 7% rate (today’s market rate example).
Now let’s say the seller’s FHA loan is $300,000 with a 2% rate. Now we have many options. Let’s say the homebuyer doesn’t have $100,000 to take care of the difference, but they do have the option to obtain a HELOC loan on their residence, or a second non-standard loan for $100,000 to make up the balance. A $300,000 loan at 2% coupled with a $100,000 loan at a 14% rate is way better than a $400,000 loan at 7%, significantly lower monthly payments.
So for every home for sale with an assumable loan, the situation may or may not work for a potential homebuyer, depending on how much money the homebuyer has to bring to the table and how big the seller’s loan balance is, all in relation to the asking price of the home for sale.
Selling your Home with an Assumable Loan
We are still finding homes listed for sale that have assumable loans, but are not advertising that huge advantage in a real estate market that is only down due to high interest rates. If you have a home with an assumable loan, it should be broadcast to every potential buyer. Work with a top 1% sellers agent. We have sold thousands of homes in the greater Portland metro and are led by Stephen FitzMaurice, licensed since 2003. Give us a call today at 503-714-1111 or chat with the bot on this site.November 25, 2022