An FHA loan now can provide a selling tool in the future. Think about the benefits of selling a home that has built in financing; both in rate and in terms of loan to value and down payment. The value of assumability is high because the consensus is that interest rates in future years will be higher than they are now. Current Buyers should think about that when they are going to become Sellers in the future.

The future Buyer will have to go through an application and Assumption process; currently the same terms and conditions apply to an assumption as with a new FHA loan. After approval, the buyer would assume all the obligations of the mortgage upon the sale of the property, and the seller would be relieved of liability. The Buyer will take over the loan at the same rate and remaining term.

Loans insured by the FHA are assumable; conventional loans are not. That means that a home buyer who finances the purchase with an FHA-insured loan and who sells the house later, when interest rates are higher, will be able to offer a potential buyer the right to assume his low-rate FHA loan.

Assumptions may offer the ability for Buyers to get financing at an interest rate lower than the market. There is an additional benefit to the buyer; reduced settlement costs as compared with a new mortgage.

To find out more contact Steve Walden, Senior Loan Officer, Mason McDuffie Mortgage, Cell 510-520-3337, swalden@mmcdcorp.com

He’s located at 6472 Moraga Avenue, Second Floor – Oakland, CA 94611

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