The Rise of Assumable Mortgages in Today's Housing Market

Wes Van Dell discovered an assumable mortgage, allowing him to secure a 2.6% rate in a challenging housing market.

### The Rise of Assumable Mortgages: A Solution for Homebuyers in a Hot Market
* 🏡 Wes Van Dell and his wife have been searching for a new home for two years, facing challenges such as **rising interest rates that inflated their mortgage costs**.
* 📈 Despite their struggles, they discovered a unique opportunity: a home with an **assumable mortgage**, allowing them to secure a **2.6% interest rate** compared to the average of **over 6%** in 2024.
* 🔑 An assumable mortgage enables buyers to take over the seller's existing loan terms, which can **significantly reduce monthly payments**, as evidenced by the Van Dells' potential savings of **over $800**.
* 📊 In 2023, only **4,052 Federal Housing Administration mortgages** were assumed, despite a notable increase in interest for such options, particularly among Veterans Affairs loans, which saw a **713% rise since 2021**.
* 🤔 Many homeowners are unaware of the **assumable mortgage option**, and real estate agents often lack the knowledge to **facilitate these transactions effectively**.
* 📝 While assumable mortgages are rare and come with complexities, including **higher down payments and more paperwork**, they present a viable path for buyers in today's unaffordable market, where **60 million people are priced out of homeownership**.
* 📅 The process can take **at least 90 days to close**, and buyers must be prepared to cover both the amount already paid towards the mortgage and any **appreciation in home value**, making it a **more intricate negotiation**.
* 🌟 Companies like Roam are working to simplify the process, and as awareness grows, **assumable mortgages may become a more common solution** for buyers navigating the **challenging housing landscape**.

Wes Van Dell: My wife and I have been looking for a new home for the last two years. Narrator: This is Wes Van Dell. He is a new homeowner who is facing many of the same issues other prospective home buyers have faced in this hot housing market. Wes Van Dell: We really just hadn't had much luck, mainly due to increasing interest rates driving up the cost of our mortgage. We did put in a couple of offers that didn't go anywhere, just because it's a very hot housing market here. Narrator: But the Van Dell's story is a little different than most home buyers navigating the market right now. Wes Van Dell: We found one that popped up. It was the right size, it was the right area, but we knew it was a little bit out of our budget just because the interest rate was too high. Just happened to look at the realtor app again, and there was a button on

that app that said, This home has an assumable mortgage. Narrator: What the Van Dells found is a rare type of mortgage called an assumable mortgage, landing them a 2.6% mortgage rate, as opposed to the 2024 average, which sits just above 6%. Raunaq Singh: An assumable mortgage is a type of home loan where the buyer can actually take over the existing mortgage terms from the seller. Wes Van Dell: That meant a difference of over $800 a month. Narrator: A common occurrence in the 1970s and 80s. Assumable mortgages are a rare find in today's real estate market. In 2023, only 4,052 Federal Housing Administration mortgages were assumed. That's still a 59% increase in FHA mortgage assumptions since 2021. For Veterans Affairs mortgages, the jump is even larger, with 2,244 mortgage assumptions in 2023.

increase of 713% compared to 2021, and 2024 assumptions are already outpacing previous years for both the VA and FHA. So what are assumable mortgages? How do they work? And why aren't they more common? Raunaq Singh: The vast majority of homeowners don't actually know that they have an assumable mortgage. Buyers don't know how to find them, and agents don't know how to coordinate the purchase. Narrator: While assumable mortgages might be a rare find, public interest in them is climbing. Google searches for the term assumable mortgage have climbed in tandem with increasing mortgage rates over the past two years. Raunaq Singh: This is the most unaffordable time to purchase in America of the last 40 years. 60 million people were priced out from being able to purchase a home. Narrator: When it comes to the average US home buying

experience, most Americans follow the same process. A buyer approaches a lender to get pre-approved for a mortgage. When the buyer settles on a home, they use their own mortgage to cover the cost at a fixed rate. The home buyer then pays off that mortgage over the term of the loan, normally 15 or 30 years. What an assumable mortgage offers is the option to take over the seller's loan. So instead of taking out your own loan at a new rate, you inherit the remainder of the seller's mortgage at whatever rate they took it out at. So a home buyer that took out an assumable mortgage in 2020 could offer an interested home buyer a sub-3% mortgage rate. Raunaq Singh: for the homeowner, the value of including their low-rate mortgage in their home sale is to maximize their probability of being able to sell the home by expanding the universe of buyers who can afford to purchase it.

Narrator: In the 1970s and 80s, interest rates hit record highs, peaking at 18% in 1981. Assumable mortgages were more popular then, but have largely fallen out of public consciousness following the passage of the Garn-St Germain act in 1982, allowing private lenders to ask for immediate repayment if a property is sold. This is called a due on sale clause. Diana Olick: Assumable mortgages are not really popular at all, simply because they're very limited. Narrator: Assumable mortgages do come with their own set of hurdles, the possibility of higher than expected down payments, knowledgeable lenders and real estate agents, and the fact that they're only offered through government-backed loans. VA, FHA, and United States Department of Agriculture mortgages are now the main type of mortgages able to be assumed in the US. Raunaq Singh: The most popular state in America for assemble

mortgages in Texas. This is because there's a large military population. There's also a large first-time homebuyer population. Wes Van Dell: We are a military community, so there's an Air Force base in our community where there are a lot of VA loans. It's also a younger college town, so there's a lot of FHA loans within our community. Narrator: And government-backed loans mean more paperwork. So if you are looking to enter into an assumable mortgage, get ready to settle in; they can take a while to close. Diana Olick: Assumable mortgages are very complicated, and they involve a lot of paperwork, and that's why a lot of lenders simply don't want to do them. Some don't even really understand them. Wes Van Dell: So there's a lot of a lot more detailed information that is required. We were told right up front by the mortgage

company that the process is going to take at least 90 days. Narrator: Homebuyers should also be prepared to put down more money than the typical 20% down payment. Assumable mortgages require buyers to cover the money already paid towards a mortgage as well as any appreciation on the home price. Diana Olick: We've seen really rapid home price appreciation, so somebody who has a home that they had 20% equity in May now has a lot more money in that home than they originally had. Narrator: For example, say a homeowner took out a 30-year fixed-rate VA loan for a home at $200,000 and paid off about $25,000 of that over two years. The person assuming the mortgage would have to pay the buyer the money they've already invested, that $25,000. Additionally, if that homeowner decides to sell their home for $250,000, the buyer has to cover the

additional 50,000 in appreciation, either in cash or by taking out a second mortgage. Wes Van Dell: A little bit of a guessing game initially, because you're negotiating on what the sale price will be of the house. Of course, you don't really know upfront what is owed on the house, either got lucky in that respect, where what was owed on the house versus what we had settled on for a sale price was almost exactly that same 20% we had saved for our down payment. Narrator: one of the biggest hurdles for getting an assumable mortgage awareness, not just by buyers but sellers, who don't have to advertise their home as assumable. Raunaq Singh: So about a fifth of the homes on the market or 20 25% of the homes on the market will be fully assumable at one time, the number of assumption transactions that are happening

is far fewer than the number of mortgages which can be assumed. Narrator: While assumable mortgages can be hard to find, and at times, complex companies like Roam are working to streamline the process for buyers and sellers. Raunaq Singh: 97-98% of the people who have these loans don't know that it can be a marketing advantage, because what kind of homeowner sits around thinking about their loan type being the marketing advantage in their home sale? Narrator: Other companies like assumable IO and assume list can help match interested home buyers with assumable mortgages. Wes Van Dell: I think once that word starts getting out, this is a possibility. We're going to see more and more of these pop up.

How A Rare Type Of Mortgage Is Landing Homebuyers A 3% Mortgage Rate

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Wes Van Dell's Unique Homebuying Experience

Wes Van Dell and his wife struggled to find a home for two years due to rising interest rates and a competitive market.

They discovered a rare assumable mortgage, allowing them to take over the seller's mortgage terms at a 2.

6% rate, significantly lower than the average.

Assumable mortgages are uncommon today, but there has been a notable increase in FHA and Veterans Affairs mortgage assumptions since 2021.

Assumable mortgages have seen a 713% increase since 2021, with 2024 projections already surpassing previous years.

Many homeowners and buyers are unaware of these mortgages, leading to a lack of coordination in the purchasing process.

With rising mortgage rates and a challenging housing market, public interest in assumable mortgages is growing as they offer the opportunity to inherit a seller's lower-rate loan.

Assumable mortgages were popular in the 1970s and 80s but fell out of favor after the 1982 Garn-St Germain act.

These mortgages now face hurdles such as higher down payments and limited availability, with government-backed loans (VA, FHA, USDA) being the main types offered.

Texas is the most popular state for assumable mortgages, driven by a large military and first-time homebuyer population, but the process involves extensive paperwork and can take a while to close.

Assumable mortgages require buyers to cover the money already paid towards the mortgage and any appreciation in the home's value.

Homebuyers should expect to put down more than the typical 20% and navigate the negotiation of the sale price and owed amount.

Awareness of assumable mortgages is a challenge for both buyers and sellers, with only 20-25% of homes on the market being fully assumable at any given time.

The Challenge and Opportunity of Assumable Mortgages

Assumable mortgages are rare and often complex, but companies like Roam are working to simplify the process.

Many homeowners with these loans are unaware of their potential as a marketing advantage in home sales.

Other companies, like Assumable IO and Assume List, are helping to match buyers with assumable mortgages, and there's potential for their popularity to grow as awareness increases.