A low note rate is compelling; bad assumptions about assumptions are not.

Key Takeaways

FHA and VA loans are generally assumable, but approval and underwriting still apply; most modern conventional loans are not. HUD Answers Servicing Guide Freddie Mac Guide
Federal law empowers lenders to enforce due-on-sale on most conventional loans; a few carved-out transfers exist. Legal Information Institute
VA assumptions typically carry a 0.5% funding fee and raise entitlement/release-of-liability issues for the seller. Veterans Affairs Benefits
Any numbers shown must be modeled with explicit inputs and treated as estimates, not promises.

Assumptions & Inputs (for any examples below)

No live loan math required here; this article focuses on rules and realities.
When you publish comparisons, document: loan balance, remaining term, note rate, market benchmark source/date, and whether taxes/insurance/HOA are excluded.

1. What It Is

An assumable mortgage lets a qualified buyer take over the seller’s current loan—rate, remaining term, balance—if the program and servicer allow it. In today’s market, FHA and VA dominate this space; modern conventional loans usually prohibit it. HUD Answers Servicing Guide

2. Why It Matters

In a high-rate environment, stepping into a legacy low rate can materially change affordability and long-run interest costs. But the value depends on program rules, servicer approval, and the equity gap you must bridge.

3. The Math (Side-by-Side Scenarios)

If you demonstrate savings, show the standard amortization formula, label every input, cite your benchmark rate source/date (e.g., Freddie Mac PMMS), and add an asterisk to each example figure. (See References for authoritative sources you can cite each time.) Consumer Financial Protection Bureau

Inputs & Formulas

When used, compute monthly P&I via M=P⋅r1−(1+r)−nM=\dfrac{P\cdot r}{1-(1+r)^{-n}}M=1−(1+r)−nP⋅r and total interest as M⋅n−PM\cdot n-PM⋅n−P. Always disclose exclusions (taxes/insurance/HOA).

Example Walkthrough

Omitted here by design; replace with your live numbers on MortgageHandoff.com and attach the “Numbers & Assumptions” disclaimer.

Sensitivity

Savings swing with benchmark rates, gap-financing costs, remaining term, and any program/servicer fees.

4. Rules & Eligibility (Program by Program)

FHA: “All FHA-insured Single Family forward mortgages are assumable,” subject to program requirements and credit review (especially for post-1989 originations). HUD Answers HUD
VA: Assumable with servicer/holder approval; 0.5% funding fee on assumptions; consider release of liability and entitlement impacts for the seller. Veterans Affairs Benefits
Conventional (Fannie/Freddie): Servicers generally enforce due-on-sale and must accelerate unless an exempt transfer applies or a special “window-period” mortgage is involved. Servicing Guide Freddie Mac Guide

5. Steps & Timeline (Checklist)

Buyer: verify program, gather full underwriting, confirm servicer path/fees, solve equity gap, close. Seller: confirm assumability, negotiate premium, document release-of-liability where applicable. Title/Realtor: coordinate addenda, timelines, and disclosures. Benefits

6. Risks & Pitfalls

Assumption denied (file incomplete, credit/income short, program limits).
No release of liability for the seller (VA) if not explicitly documented. Benefits
Equity gap financed at a high rate erodes the benefit.
Conventional due-on-sale triggers payoff—deal becomes a standard new loan. Legal Information Institute Servicing Guide

7. Pricing & Negotiation (Value the Rate, Not Just the House)

Frame negotiations around the present value of the payment/interest delta vs a realistic benchmark loan, minus assumption/servicer fees and any cost of seconds. Investors will also model DSCR and vacancy risk.

8. Templates & Tools

Seller calculator: Present value of monthly delta vs premium; breakeven months.
Buyer stack model: First-lien assumption + second-lien/gap vs full-market new first.
Disclosure kit: Servicer contacts, fee schedules, checklist of required docs.

9. Real-World Examples

Media and market data point to rising interest in assumptions as rates stay elevated—demand is real but logistics and gaps are the friction. Use these stories sparingly, and always pair with primary-source rules. The Washington Post

10. Next Actions

Confirm loan type/origination year; pull the note to verify clauses.
Call the servicer for their assumption process and fee sheet.
Build two amortizations (assumable vs benchmark), then add any second-lien.
Draft contracts with clear assumption contingencies and timelines.

CTA: Join the VIP Interest List on mortgagehandoff.com to see verified assumable opportunities first.

The 10 Biggest Myths—Debunked

Myth 1: “All mortgages are assumable.”
Reality: FHA and VA are generally assumable; most modern conventional loans enforce due-on-sale and must be paid off on transfer unless an exemption applies. HUD Answers Servicing Guide Freddie Mac Guide

Myth 2: “If it’s assumable, no one checks my credit or income.”
Reality: Modern FHA/VA assumptions typically require full qualification and servicer approval; pre-1989 FHA rules differed. HUD Answers HUD

Myth 3: “VA assumptions are free.”
Reality: VA charges a 0.5% funding fee on assumptions unless the buyer qualifies for a waiver; closing costs may also apply. Veterans Affairs Benefits

Myth 4: “Assuming a VA loan always restores the seller’s entitlement.”
Reality: Restoration typically requires a qualified veteran buyer who substitutes entitlement; otherwise, some or all of the seller’s entitlement can remain tied up. Get the release in writing. Benefits

Myth 5: “Conventional loans can usually be assumed if the seller agrees.”
Reality: The note controls. With Fannie/Freddie-standard paper, servicers must accelerate on transfer unless it’s an exempt transaction or a special legacy “window-period” loan. Servicing Guide Freddie Mac Guide

Myth 6: “Due-on-sale is a guideline; lenders rarely enforce it.”
Reality: Federal statute (Garn-St. Germain) preempts state limits and authorizes enforcement of due-on-sale, subject to narrow carved-out transfers in subsection (d). Legal Information Institute

Myth 7: “Assumptions don’t need new disclosures.”
Reality: Under Regulation Z, an assumption meeting §1026.20(b) is a new transaction requiring new disclosures to the subsequent consumer. Consumer Financial Protection Bureau

Myth 8: “If the rate is low, the deal is automatically a win.”
Reality: A large equity gap (cash or higher-rate second lien) plus fees can neutralize or invert the savings. Always model the full stack using current market benchmarks. (Use PMMS or equivalent and date-stamp it.) Consumer Financial Protection Bureau

Myth 9: “Assumptions close just as fast as normal deals.”
Reality: Processing timelines vary by servicer and file quality; approvals can take weeks to months. Build buffers into contracts and plan for contingencies. (See VA circular process expectations.) Benefits

Myth 10: “USDA and other programs are never assumable.”
Reality: While this site focuses on FHA/VA, note that program-specific rules exist across agencies. Always confirm with the program/servicer; do not assume “never.” (Start from the program’s official handbook or site.)

FAQs

1) Why are modern conventional loans almost never assumable?
Because of due-on-sale clauses that servicers must enforce unless an exempt transfer applies. Servicing Guide Freddie Mac Guide

2) Are all FHA loans freely assumable without qualification?
No. Post-1989 FHA requires creditworthiness review and servicer approval. Earlier FHA vintages differed. HUD

3) What is a due-on-sale clause in plain English?
A contract term allowing the lender to require payoff if you transfer the property—codified and protected by federal law. Legal Information Institute

4) Do VA assumptions always include a funding fee?
Typically 0.5% of the balance, unless the buyer qualifies for a VA fee exemption. Veterans Affairs

5) Do assumptions require new TILA/Reg Z disclosures?
If it meets §1026.20(b) criteria, yes—treated as a new transaction for disclosure purposes. Consumer Financial Protection Bureau

Numbers & Assumptions Disclaimer

All example payments, savings, interest totals, and timelines are illustrations based on the “Assumptions & Inputs” in this article as of the stated “Last updated” context. Actual results vary by buyer qualifications, lender/servicer approvals, program rules, rates in effect at application, and final contract terms. No guarantees are expressed or implied.

General Information Disclaimer

This article is for educational purposes only and is not financial, legal, tax, or lending advice. All transactions are subject to lender/servicer approval and applicable laws. Consult licensed professionals for advice on your situation.

References

HUD FAQ — “Are FHA-insured mortgages assumable?” (answers.hud.gov) HUD Answers
HUD 4155.1, Ch. 7 — Assumptions (historic pre/post-1989 rules) (hud.gov PDF) HUD
VA Funding Fee & Closing Costs — Assumptions 0.5% (va.gov) Veterans Affairs
VA Circular 26-23-10 — Assumption processing, fee, release of liability (va.gov PDF) Benefits
12 U.S.C. §1701j-3 — Garn-St. Germain due-on-sale statute (law.cornell.edu) Legal Information Institute
Fannie Mae Servicing Guide D1-4.1-05 — Enforcing due-on-sale (servicing-guide.fanniemae.com) Servicing Guide
Freddie Mac Guide §8406.1 — Due-on-sale; accelerate on transfer (guide.freddiemac.com) Freddie Mac Guide
CFPB Regulation Z §1026.20(b) — Assumptions; new transaction disclosures (consumerfinance.gov) Consumer Financial Protection Bureau
CFPB Regulation Z index — Part 1026 (consumerfinance.gov) Consumer Financial Protection Bureau
LII Wex — Due-on-sale clause (plain-English overview) (law.cornell.edu) Legal Information Institute

Top 10 Myths About Assumable Mortgages Debunked

Key Takeaways

Assumptions & Inputs (for any examples below)

1. What It Is

2. Why It Matters