How Do You Assume Someone Else's 3% FHA Or VA Mortgage?

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Today’s topic: assumable mortgages

Welcome to Mortgage Mom Radio. I’m Debbie Marcoux, I am the Mortgage Mom, and today we are going to be talking about assumable mortgages. I have had so many questions around this — not just recently, but really over the last couple of years — and it is not something I’ve ever talked about or touched on in the show. So I do want to have that conversation today.

I want to talk about how it works. I want you to be aware of what kinds of loans you would be able to assume, and what exactly you have to do as the borrower trying to assume that mortgage from the seller. I also want to make sure the seller is aware of what they’re getting into, and whether that might be something beneficial for them to advertise if they’re planning to sell their home.

If it looks like I am reading, I am. I want to make sure I stay on target and that I get you all of the information I promised in the description of the show.

The short version: whose loan can you assume?

The short version is that sellers holding primarily FHA and VA mortgages can offer to let you, as the buyer, assume their interest rate. If they have a 3% interest rate, or three and three quarters, or four and a half, or even five, and they want to allow you to assume their mortgage, that is something they can do if they currently hold a VA or an FHA loan.

Now, you can also do that with conventional loans, and a lot of people don’t know that. However, the majority of the notes that are written do not allow assumptions on fixed rate mortgages. So typically, if the loan is conventional, it has to be an adjustable. If you are a seller with a conventional adjustable-rate loan, what you might want to do is pull up your documents, look through your note, look at what you signed and what it says, and see whether that’s an option you could offer to a new buyer coming into your property.

Even somebody with a five- or seven-year fixed period: typically, if the bank they got the mortgage from does allow assumptions, they do not allow the assumption until after the fixed rate term has expired. It has to be in its adjustable portion before it becomes an assumable loan. And that’s not every lender — every single conventional lender writes their notes differently. Some will offer the loan to be assumed and others will not. I have never personally in my career seen a 30-year fixed rate conventional mortgage that was assumable. I have only ever seen it offered on a loan that is adjustable, and already in its adjustment phase. So I am really focusing mostly today on VA and FHA loans, because those are 30-year fixed interest rates that do have assumable options available.

This is not a portable mortgage

I want to make this very, very clear: today’s episode is about assuming somebody’s loan. This is not a show about portable mortgages. Portable mortgages are a completely different animal, and something that has not been approved. There is a bill on the table where they are talking about the possibility of rolling that out.

About a year ago here on my channel I did explain what portable mortgages are, why they are not available today in the US, and what some of the challenges will be in rolling something like that out should it be approved. But as of today, September the 2nd, 2026, portable mortgages are not currently available. You can always go search the YouTube page — almost every single video I have comes from my live show, so go to my live playlist and look for portable mortgages. There is nothing approved and no further guidance on it, so there is nothing more I can tell you than what I told you a year ago.

The gap: what they owe versus what the home is worth

So if you have a VA or an FHA loan, or your conventional loan happens to have an assumable option on it, how does it work? This is very important both to somebody who has a mortgage today and to somebody buying a home who would like to be able to assume one of those low interest rate mortgages.

What you have to think about is the gap — the spread between how much they owe on the loan and what the home is worth today. So if they owe $500,000, for example, and their home is worth $700,000, think about that for a minute.

Most of the interest rates that are below 5% were achieved during the years of 2020 through 2022, for the most part. Some people were able to jump into 5% interest rates on VA and FHA loans more recently than that, around October. But really the majority of those loans came to be between 2020 and the end of 2022.

So those clients, even though when they bought those homes they either got in with zero down or on an FHA with maybe three and a half percent down, their homes have gone up in value. Their properties are worth more money than they were back then. If they bought it for $500,000 in 2020, realistically it’s appreciated quite a bit — it’s probably worth six or seven hundred, possibly more, depending on where they bought, the pocket or the area they’re in, whether they bought new from a builder, whether they renovated. There’s no way for me to give you an exact number, but know that there is going to be a spread between what they owe and what the property is worth.

So you, as the buyer, need to be able to come in with that difference in cash. And mind you, they’ve probably been paying on that loan for four or five years as well. So what do they owe on that loan today, versus the price they want for their property?

Covering the gap

How do we figure out how to cover the spread? Because not everybody has $100,000 or $150,000 or $200,000 sitting in cash. If you do, fabulous — if you have somebody with a 3% interest rate who’s willing to let you assume that loan and you’ve got the money, fabulous. But a lot of times buyers don’t have the money to cover the spread.

What you would need to do is call someone like me — a loan officer or a lender — and find out what second mortgage options are available to you. If you don’t have the cash, you are going to need to get the cash somehow to bridge that gap. We can offer a second mortgage, or possibly a home equity line of credit, to help you bridge it.

Be aware: most second mortgages or home equity line options available are not going to let you go to 100% financing. Many of them cap at 90%, which means you will need a 10% down payment. Some of the options we’ve got will let you go to 95%, which means you would need a minimum of 5% available.

So what you want to find out is: what is the interest rate the seller has? What is the loan amount on that loan? How much are they selling for? How much of a loan do you need? Do you have the cash, or do you need a loan? Then you make the phone call to me, someone on my team, or a lender you’ve been talking to, and you discuss your options — what interest rate will that second be at, what will that monthly payment be.

Running a blended rate

Then we’re going to do some work with a blended rate calculator. For example, maybe you are buying a million-dollar home. Maybe the seller has a mortgage that is $400,000 at 3%, but you need a $500,000 second mortgage. Second mortgages will have a higher interest rate than a first mortgage would. So it’s going to take somebody like me who can show you a blended rate calculator to help you determine: if we look at $400,000 at 3% and $500,000 at, you know, 8%, what are you actually paying on all of that money? Does it make more sense to do one straight mortgage loan for a new purchase, maybe at an interest rate in the mid-6s to high-6s, which is about where the market is at today?

So we need to talk about it. You need to get the details. It is very important for you to know that information, and then to figure out how you’re going to bridge that gap. Is it an awesome option? Absolutely it is. But it is truly based on the scenario the seller has available: how much do they owe, what is their interest rate, how much do they need, what are they selling for — and then what does that mean for you, and what is the best option for you based on that seller’s terms?

Assuming a loan does not mean skipping the qualifying

Another thing that is very important, and a lot of people do not realize and misunderstand: assuming somebody’s mortgage does not mean that you don’t have to qualify. It is very, very important that you hear that. When you assume somebody’s mortgage you are literally assuming their interest rate, their loan balance, their terms — everything they agreed upon and signed on the dotted line. You are assuming those things. The bank that holds that note still has to approve you to take over that note.

Let’s back up. Number one: the seller of the property is going to call the 800 number on their mortgage statement, talk to the bank, and say, “I’m going to sell my home. I’ve got a buyer who is interested in assuming my mortgage. What are the steps? What do we do? What do I tell them to get started?”

There will be a loan application you have to complete and documentation you have to supply. It will be almost identical to a mortgage loan application you would do for a brand new mortgage loan. That bank will review your income, your pay stubs and your W-2s — or if you are self-employed, they will be looking at your tax returns.

Remember that the majority of the loans available for assumption today are VA and FHA loans, and VA and FHA loans are full income documentation qualifying mortgage products. That means you have to qualify exactly the same way as the person who took that loan on day one. So if you are self-employed, this is not a bank statement loan. This is not a DSCR loan where the property’s rental income carries it. You have to qualify with full income documentation and a full credit package. Your credit report and credit score, your monthly debts, your debt-to-income ratios — everything will be reviewed.

So once again, I want to make sure you all are aware: this is not a way to get into a property without having to qualify. You absolutely have to qualify, and you have to bridge the gap between the current seller’s loan amount and the property value you agreed to purchase at, either in cash or with another loan helping you.

The seller’s side: what a VA seller gives up

Before I go further, I want to talk about the detriment for the seller in allowing somebody to assume their loan, so that you are aware of what those consequences or repercussions could be.

Start with the benefits, though. The biggest benefit to the seller is that they’ve got something they can offer that somebody else in their same neighborhood or the same tract may not be able to offer. When a buyer is walking in looking at homes, they’ve got a subdivision picked out, and there are two or three or four homes to choose from, that home with the assumable mortgage might be more attractive than the home they have to go out and get brand new financing on at today’s interest rates. Seller, that’s a benefit for you. Buyer, that’s a benefit for you — you get to walk in and possibly assume somebody’s interest rate that is lower than today’s market.

But with VA, this is absolutely the biggest piece a seller needs to be aware of. If they are a veteran with a VA loan, or even still active military but their current mortgage is a VA loan, and they are thinking about letting a buyer come in and assume that loan — they are the ones who will be hurt the most by that decision. So if you are not a veteran and you have a seller who is willing to let you assume their loan, you are a very, very special person. You need to think about it as: you are extremely lucky. Because it truly does hurt somebody who’s got a VA loan.

VA entitlement and the $36,000 on your certificate of eligibility

How does it hurt them? They have what’s called VA entitlement. When we go to do a loan for a veteran, we have to pull up whether or not they have earned their entitlement to get VA financing. If you are a vet and you want to see whether you have entitlement, you can go to your VA portal, go into your certificate of eligibility, print it out, and you will see your entitlement number says $36,000. That is the typical number we see on a VA certificate. I have never seen a number different than that unless somebody has already taken a VA loan and has a loan outstanding — and that is exactly what would happen to a seller who decides to let somebody assume their loan.

A lot of people get very confused, because they say, “Well, $36,000 isn’t going to buy me a $600,000 property. That doesn’t do me any good.” That $36,000 is part of a calculation we do based on where the subject property is located and what the conventional conforming loan limits are for that area, for the county that property is located in. So ignore the $36,000, other than knowing this: if you have never had a VA loan — or you’ve had one before but don’t currently have one outstanding, you’ve paid it off — that number on your certificate of eligibility will say $36,000.

If you allow somebody to assume your VA loan, you are losing your entitlement for the amount of that loan. However much of that entitlement was used toward the loan you have outstanding today does not get replenished for you, because that loan is still outstanding. Although somebody else walked in and assumed that loan, that loan was taken on your eligibility. So your entitlement will remain reduced until the person who assumes your loan pays that loan off. And what are the chances that a buyer coming in and assuming a 3% interest rate is going to want to pay that loan off? Probably not very high. They’re most likely never going to want to pay that loan off.

Can a veteran still buy again?

So the question we have is: do you still have enough entitlement available to go buy another property, reutilizing your VA benefit? Most clients I have are buying homes zero down, and they are utilizing almost all — if not all — of the entitlement available to them.

Many times veterans are led to believe they can only have one VA loan outstanding at any given point in time. That is absolutely not true. You can have more than one VA loan if you have the eligibility or the entitlement available to get a second property.

For example: let’s say you took a loan for $500,000 fifteen years ago and you only owe $250,000 on that mortgage today. You have paid that balance down to where you very well may have enough entitlement to go get another loan in the county and the area you’re looking to buy — maybe another $300,000 or $400,000 property. Are you going to be able to go buy another five or six hundred thousand dollar property with zero down payment? Most likely not. We’ve got to do the calculations, and sitting here in studio not knowing every single person’s specifications, there’s no way for me to answer that as a flat-out no — but most likely no. Would we be able to get you a second VA loan if you had some money available for a down payment? Very good possibility that we could.

So that is something very important for people to understand. As a seller, you are losing part of your eligibility and your opportunity at a new property, or future properties you might want to get using your VA loan.

The half-point assumption fee, closing costs and cash to close

I do want you guys to know this: there is a half of a percent assumption funding fee that does apply. When you assume somebody’s mortgage going directly through the bank they’ve got their mortgage with, you are going to be charged a half of a percent assumption fee. Make sure you’ve got that in the back of your mind.

I’ve had people call me before who were assuming someone’s loan and didn’t realize there were closing costs in this whole purchase transaction. You will have closing costs, no different than any other transaction — escrow fees, title fees, attorney fees. My podcast goes nationwide, so depending on the state you are doing your financing in, that determines whether you’re in an escrow state, a title state or an attorney state. But those normal fees will apply, and you will have to bring money in to close on top of the amount of the gap between the sales price and the seller’s loan balance.

Again, somebody like me — a loan officer, a lender — can help you obtain a second mortgage, which could bridge some of that gap, but you should still expect to bring in 5 to 10% at a minimum out of your own pocket, plus your closing costs. Those move quite a bit depending on the state, the county, the city, but I would say if you anticipate about 2% of the sales price, that’s a good relative number as you’re estimating in your head. You buy it for $600,000, I would estimate about $12,000 in closing costs, plus the difference you need for the gap.

Why your loan officer cannot process the assumption

Could you possibly get the opportunity to get into an interest rate that is lower than the market today? Absolutely, you totally can. I’m absolutely here to help you, my team is here to help you, we have worked on these numerous times in the past and can guide you.

But here is one thing I do want you to be aware of: I personally do not handle the assumption piece. Just like I said a bit ago in the show, you have to apply with the lender that currently holds the note. I cannot be involved in any of that. I originate brand new financing — that is what I do as a mortgage loan officer. I do not work with servicing; that has nothing to do with me.

Can I guide you? Can I tell you who to call and how to get it started? Absolutely. Can I guide you on whether the assumable makes sense — how much is their interest rate today, what is their loan balance today, how much are you going to buy the property for, what does that mean your gap is going to be, how do we get you the money for the gap, what is that money going to cost you, how much money are you going to need out of pocket? Absolutely. Those are the things that I do. But I cannot help you complete your package for that lender, I cannot help you get it submitted, and I cannot help you get approved for that loan. Unfortunately, that happens through servicing. When you have a mortgage and there’s an 800 number on your statement, those people you call on the phone — who aren’t always the most helpful — are the people you will be working with as a buyer trying to assume that seller’s note.

Timelines: expect at least 60 days

So it does get a little bit difficult, and they do take time. Be aware that it is not at all unreasonable to think that a mortgage assumption could take as long as 90 days. I have actually seen them go through in 30 to 45 days — I have seen that happen, but it is not very common. I would say if you go somewhere in the middle and expect at least 60 days for something like that to close, you’d be on the right track as far as your thought process.

Seller, that is a question you want to ask your mortgage company before you even entertain the option of letting somebody assume your loan. You want to know from them: how long is the process once the person applies and submits the package for review? How long do they need? What are their turn times? Because if they tell you it’s a 60 to 90 day process, and you want to close on your home because you need the proceeds out of your property faster than that, you may not want to go down that path of accepting an offer from a buyer who wants to assume your loan.

Wrap-up

So there’s a lot to it, and a lot of information you need to know about it. My team is here to help you in any way we can. Whether you are a seller or a buyer interested in understanding it in more detail, go to mortgagemomradio.com and get yourself an appointment with me — I do phone appointments and my calendar is there. If you want to call spur of the moment to see if I’m available, nine times out of ten I am; if I’m not, I will call you back as soon as I can that same day. The toll-free number is 844-935-3634 — 844-WE-LEND-4.

I’ve got calculators and all kinds of great things on my website. Get yourself signed up for my newsletter — it goes out every single week and keeps you up to date on where our interest rates are today, and I always offer a scenario and a recap of what we talked about last week in case you missed an episode. One thing about newsletters: Gmail, Yahoo and Outlook love to send them to spam or junk. So if you signed up but haven’t seen one come through, check your spam or junk folder — good chance it’s in there — and tell your email provider we are not junk, and then you’ll never miss one going forward.

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