A loan assumption is a transaction in which a person (the “assumptor”) obtains an ownership interest in real property from another person and accepts responsibility for the terms, payments and obligations of that other person’s mortgage loan. The assumptor is liable for the outstanding obligations (including any fees, advances, or other charges), and unless a release of liability is requested, the original borrower will remain liable as well. To qualify for an assumption, you may need to go through an underwriting process, including a review of your credit report and credit score.

Are all loans assumable?

No, only certain loans are assumable. The loan investors determine whether it is assumable. If a loan is assumable, the investors also set the terms and conditions for an assumption.

Assumable and non-assumable loans

The following loans are NOT eligible for a loan assumption:

Loans not secured by real estate (mobile/manufactured home-only loans with no land)

  • Subordinate liens
  • Credit sales
  • Unsecured loans
  • Accounts in active bankruptcy

The following loans MAY be eligible for a loan assumption. Please note there may be other requirements before you can assume an eligible loan.

  • FHA loans
  • VA loans
  • Certain conventional mortgages (e.g., adjustable rate mortgages after the introductory rate has expired)

Loans may be eligible for an assumption under the following circumstances:

  • Death of borrower (by successor in interest)
  • Divorce
  • The person wishing to assume the loan is a relative of the current borrower (spouse, child(ren), parent(s), brother(s), or sister(s), grandparent(s), or grandchild(ren) of the borrower)
  • Things to know about assuming a loan
  • The person wishing to assume the loan may be required to reside at the property. This requirement is determined by the loan investor.
  • Release of liability not guaranteed. An assumption does not always result in a “Release of Liability” for the current borrower.
  • Homeowners insurance is required.

What is the loan assumption process like?

Like most financial matters, assuming a loan takes time and requires documentation. The average length of time to complete a loan assumption is 45-90 days. Completion times may vary, and be subject to change based upon underwriting criteria. Certain documents are required to process a loan assumption. These may vary, based on the type of loan and the circumstances.

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