^{You Know What They Say About Assumptions!}

Written by, David Hall

Assuming a loan, as of late, has been an increasingly popular topic of discussion. What is a loan assumption? Assuming a loan means that you essentially directly take over the lower monthly payment of a loan from the original borrower. What some would call the down side is that you have to cover the seller’s appreciation/equity position which is difficult for a lot of buyers.

Why is the payment lower? When you assume a loan on a home that was purchased in 2020 or 2021 you could be stepping into a loan with a significantly lower interest rate and thus a significantly lower payment.

Can any loan be assumed? No, only FHA, VA and USDA loans have the ability to be assumed, but the loan servicer has the final say of whether or not they will approve the assumption. Also, you don’t have to be a veteran to assume a VA loan.

According to Ryan Lundquist of Sacramento Appraisal Blog, out 18,000 since 2023 there have only been 23 loan assumption sales. So yes, they may be a more popular topic of discussion recently, but they are still VERY rare, and from experience, a much more laborious and time consuming transaction.

Personally, I helped somebody sell their house, purchased with a VA loan and it took nearly 5 months to close escrow. The average days to close escrow for the 23 MLS assumptions was roughly 84 with a high a 138 and a low of 30. If you ask me, I think that 30 day escrow was being worked on off-market and added to the MLS in order to get credit for the sale. That is entirely conjecture though.

The bottom line is, if you have the cash, you’re patient and the circumstances work out for both parties, assuming a loan, although time consuming, can be a wonderful option for a buyer to purchase a home at today’s market value with a rate from several years ago. You’ll have a great payment and start with a lot of equity.

Please let me know if you have any questions or want to know more about purchasing a home with an assumable loan.