Depending on the circumstances, a buyer can take over or assume a seller’s mortgage. The advantage of an assumable mortgage is that there is no need to apply for a new mortgage. 

When you assume an existing mortgage, you can buy a home without risking your own credit score. You can then use money from the sale of your previous home to pay off the balance of the mortgage.

On the other hand, the advantage to the seller is that they can take the money they would otherwise spend on a new mortgage and apply it to other investments.

In the following paragraphs, you will learn about an assumable mortgage, when to best get it, and who can benefit from it.

Understanding an Assumable Mortgage

Rather than taking out a new mortgage, an assumable mortgage allows a buyer to assume the mortgage of the seller. This includes the rate, repayment period, current principal balance, and other parameters.

The most significant benefit for the buyer is that the conditions of the seller’s mortgage may be more appealing than the current terms the buyer would sign into. This is why it’s vital to compare both documents and look for weigh each one’s pros and cons.

The interest rate is important, but other considerations should be considered as well. Overall, assuming an existing mortgage can save the buyer time, money, and effort in the homebuying process.

Keep in mind that, if you take over the mortgage, you’ll also have to pay off whatever equity that the seller has. You must pay this off either with your down payment or with another loan.

Identifying Mortgage Types that Can Be Assumable

An assumable mortgage clause may theoretically be included in any sort of home loan. Only three forms of loans, on the other hand, usually have this feature.

  • FHA Loans: In order to assume an FHA loan, you must meet all of the FHA’s requirements. These requirements include being able to put a 3.5 percent down payment and having a credit score of at least 580.
  • USDA Loans: You must have a credit score of at least 620 to qualify for a USDA loan. You must also meet certain income and location restrictions. A USDA loan is usually assumed with a new rate and terms. However, in some situations, such as transfers between families, it might be assumed with the same rate and terms without meeting eligibility requirements.
  • VA Loans: To take out a VA loan, the lender must first authorize it, which is normally done by assessing your creditworthiness as a borrower. You don’t have to be a veteran or a member of the military to take out a VA loan. There’s no minimum credit score for this, but a lender will strive for a score of 620 or above. You’ll also have to pay the 0.5 percent fundraising charge.

Checking If You Have an Assumption Clause

Peruse your mortgage contract to see if you have an assumption clause that says your loan is assumable. This clause permits you to transfer your mortgage to another person. Remember that if the mortgage lender allows assumption, the new borrower will usually be held to the loan’s eligibility standards.


If you’re unsure how to take on an assumable mortgage, it’s best to consult with a reputable mortgage company. They will have a team of professionals ready to assist with the assumable loan you’re considering.

Clayson Mortgage is the mortgage company in Utah for all your financing needs. We’re prepared to shop banks and lenders for you. Book an appointment with our brokers today!