Buying a Home in LA with an Assumable Mortgage

AssumableWe know that our buyers are looking for creative solutions to affordability challenges in the Los Angeles market. One option that is available in some cases is an assumable mortgage. If you're curious about buying a home in Los Angeles with an assumable mortgage, we can answer some FAQs and work with you to find homes for sale in LA that will work for your unique needs. 

Contact us any time to learn more about buying a home in LA, and keep reading to learn more about assumable mortgages. 

What is an assumable mortgage?

An assumable mortgage is a type of home loan that allows a buyer to take over the existing mortgage of the seller. In essence, the buyer assumes responsibility for the mortgage terms, outstanding balance, and interest rate, essentially stepping into the shoes of the original borrower. This arrangement can offer advantages for both the buyer and the seller, providing a unique alternative to traditional mortgage financing.

What are the benefits of buying with an assumable mortgage?

The primary benefit of an assumable mortgage is being able to take on the interest rate and other terms of the existing mortgage, which may not be available in the current market. Assuming a mortgage with a lower interest rate than current market rates can be a significant advantage, and there are some other benefits as well. 

Since an assumable mortgage bypasses the need for a new loan origination, buyers may incur lower closing costs compared to obtaining a new mortgage. Additionally, there is often more flexibility in the timeline of the sale with an assumable mortgage. The assumption process is often faster than securing a new mortgage, providing a streamlined path to homeownership.

In some cases, buyers might find it easier to qualify for an assumable mortgage, especially if they have a solid financial history and the existing interest rate is favorable.

Are there any risks or cons associated with assumable mortgages?

There are not many risks associated with looking for a home with an assumable mortgage. Assumable mortgages are not as common as traditional mortgages, limiting the pool of available properties for you, but as long as you are careful to understand the terms of the mortgage you shouldn't have any reason to worry .

The only issue that sometimes comes up is a due-on-sale clause. Some mortgages include a due-on-sale clause, which allows the lender to demand the full repayment of the loan if the property is sold or transferred. While the clause is not always enforced, it adds an element of uncertainty. We recommend being sure about the presence of this clause before moving forward.

Can all mortgages be assumed?

No, not all mortgages are eligible to be assumed. Most conventional mortgages are not assumable. 

Federal Housing Administration (FHA) loans are often assumable, allowing buyers to assume the existing mortgage with approval from both the lender and the buyer. Veterans Affairs (VA) loans are assumable, but, similar to FHA loans, approval from the lender and the buyer is required. Some United States Department of Agriculture (USDA) loans are assumable, again subject to lender and buyer approval.

Where can I find a home for sale with an assumable mortgage in LA?

If buying a home with an assumable mortgage is looking like the right option for you, reach out to us to learn more about finding the right property. Los Angeles is a competitive and vast market, but we have the network to help you find a property that aligns with your goals.

Ready to find your home for sale in LA? Contact us any time. 

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