How you can assume a low mortgage rate from your home seller.
This week's topic: Can I assume the seller's mortgage? Recently, with interest rates soaring compared to the past couple of years, I've received inquiries from buyers wondering if they can assume a seller's mortgage with a remarkably low interest rate.
The quick answer is yes; you can assume most mortgages, but that involves a specific process and a few considerations. Let's explore a scenario where a seller is asking $500,000 for their home, and they owe $300,000, which a buyer aims to assume at an attractive 3% rate, particularly appealing when the average mortgage rate hovers around 7.5%.
"You probably need cash to assume a mortgage."
However, there are important points to keep in mind. Firstly, the buyer must qualify with the seller's lender, meeting standard pre-qualification criteria, including credit, income, and debt-to-income ratios. Secondly, in nearly all cases, the buyer needs to cover the gap between the $500,000 asking price and the $300,000 mortgage assumption with cash.
In this example, the buyer would require around $200,000 in cash, plus additional funds for closing costs. While there's a possibility of using a second mortgage, it's often challenging and unlikely. So, while it is possible to assume the loan, having the necessary cash to cover the difference is essential.
I hope this sheds light on this significant question. If you have any more inquiries or need further information, please don't hesitate to email me or call at (772) 370-8631. Make it a great day.