Assumable Mortgage: How to Take Over Someone's Low Rate

Imagine buying a home in 2026 when rates are 7%, but getting a 3.5% mortgage instead. That's the power of assumable mortgages—and in a high-rate environment, they're making a major comeback.

An assumable mortgage lets you take over the seller's existing loan, including their interest rate. If they locked in a low rate in 2020-2021, you could save hundreds of thousands in interest by assuming their mortgage instead of getting a new one.

This guide explains how assumable mortgages work, which loans are assumable, the process, costs, challenges, and whether assuming a low-rate mortgage makes sense for your home purchase.

What Is an Assumable Mortgage?

An assumable mortgage is a home loan that can be transferred from the current owner (seller) to the new owner (buyer). When you assume a mortgage, you take over the seller's loan—same balance, same interest rate, same remaining term.

What you get:

Seller's existing interest rate
Remaining loan balance
Remaining loan term
Original loan terms and conditions

What you're responsible for:

Making the monthly payments
Meeting lender's qualification requirements
Paying the difference between sale price and loan balance

Why Assumable Mortgages Matter in 2026

The rate environment:

2020-2021: Mortgage rates hit historic lows (2.5%-4%)
2022-2023: Rates spiked to 7%-8%
2024-2026: Rates stabilizing around 6%-7%

The opportunity: Many homeowners have mortgages with rates 3%-4% lower than today's rates. Assuming one of these loans could save you:

$300-$800/month on a $400,000 loan
$108,000-$288,000 over 30 years

The challenge: Most mortgages aren't assumable—but some are, and knowing which ones can give you a major advantage.

Which Mortgages Are Assumable?

FHA Loans (Fully Assumable)

All FHA loans are assumable
No restrictions on who can assume
Buyer must qualify with lender
Most common assumable loan type

How many are out there?

FHA market share: ~15% of mortgages
Millions of FHA loans originated 2020-2021 at low rates

VA Loans (Fully Assumable)

All VA loans are assumable
Non-veterans CAN assume (with qualification)
Veteran sellers should be cautious (see below)

Special VA considerations:

Veteran seller: If non-veteran assumes your VA loan, your VA entitlement may remain tied to that loan until it's paid off
Veteran buyer: Can assume and get best terms
Release of liability: Critical for seller to obtain

USDA Loans (Assumable with Restrictions)

Assumable but with income restrictions
Buyer must meet [USDA income limits](/blog/usda-loan-guide)
Property must still be in USDA-eligible area
Less common but possible

Conventional Loans (Generally NOT Assumable)

Most conventional loans have "due-on-sale" clauses
Lender can demand full payment when property is sold
Some very old conventional loans (pre-1980s) may be assumable
Don't count on assuming a conventional loan

Jumbo Loans (Generally NOT Assumable)

Due-on-sale clauses are standard
Lenders want to re-underwrite at current rates
Extremely rare to find assumable jumbo loan

Bottom line: If you want an assumable mortgage, focus on homes with FHA or VA loans.

How to Find Homes with Assumable Mortgages

Strategy 1: Filter on Real Estate Sites

Some listing sites now allow filtering for assumable mortgages:

Zillow: Look for "assumable" in listing details
Realtor.com: Search filters
Redfin: Keyword search

Reality check: Not all listings accurately tag assumable loans. You'll need to ask.

Strategy 2: Ask Listing Agents Directly

Call or email about listings you're interested in
Question: "Does the seller have an FHA or VA loan that might be assumable?"
Agents don't always know, but it starts the conversation

Strategy 3: Look for FHA/VA-Friendly Markets

First-time buyer markets (tend to have more FHA)
Military towns (more VA loans)
Affordable housing markets (higher FHA share)

Strategy 4: Work with Assumption-Savvy Agents

Some buyer's agents specialize in finding assumable loans
They know how to search and negotiate
Worth finding one if this is your strategy

Strategy 5: Direct Outreach in Target Neighborhoods

Identify neighborhoods you want
Send letters to homeowners who bought 2020-2021 (likely low rates)
Ask if they have FHA/VA loan and would consider selling

Sample message: "Hi, I'm interested in purchasing a home in your neighborhood. If you have an FHA or VA loan from 2020-2021, I'd love to discuss assuming your mortgage, which could benefit both of us. Would you be open to a conversation?"

How the Mortgage Assumption Process Works

Step 1: Verify Loan Is Assumable

Ask seller: What type of loan do they have?
Contact lender: Confirm assumption is allowed
Review loan documents: Check for assumption provisions

Step 2: Negotiate Purchase Terms

Just like any home purchase:

Agree on sale price
Contingencies
Closing timeline
Key difference: Structure deal around assumption

Step 3: Apply for Assumption with Lender

Contact seller's lender
Submit assumption application
Provide financial documentation (income, credit, assets)

Documentation needed:

Credit report authorization
Income verification (W-2s, pay stubs, tax returns)
Asset verification (bank statements)
Employment verification

Step 4: Lender Underwrites You

Credit check: Most lenders require 580-620+ credit score
Income verification: Must show ability to repay
DTI analysis: Typically 43%-50% maximum
Assets: Must have funds for down payment (gap between price and loan balance)

You must qualify just like a new loan—assumption isn't automatic.

Step 5: Lender Approves Assumption

Approval can take 30-90 days (longer than new loan)
Lender issues assumption approval
Terms and rate stay the same as original loan

Step 6: Close the Transaction

Standard home closing
Sign assumption documents
Pay difference between sale price and loan balance
Seller released from mortgage (if lender grants release)

Step 7: You Take Over Payments

Loan is now in your name
You make monthly payments at the original rate
Seller is released from obligation (hopefully)

Costs of Assuming a Mortgage

Assumption Fee

FHA loans: Typically $900-$1,200
VA loans: Typically $300-500 (if veteran assuming), $500-1,000 (non-veteran)
Much cheaper than origination fees on new loan ($3,000-$8,000)

Lender Processing Fees

Some lenders charge additional processing fees
Varies by lender
Total lender fees: $500-$2,000

Title and Closing Costs

You still need [title insurance](/blog/title-search-explained)
Escrow/settlement fees
Recording fees
Total: $2,000-$5,000

Appraisal (Sometimes Required)

Lender may require appraisal
Cost: $400-$800

Credit Report

$25-$100

Total Assumption Costs

Typical total: $3,000-$8,000
Compare to new loan closing costs: $8,000-$24,000
Savings: $5,000-$16,000+

Plus: You're getting the seller's low rate, which is the real prize.

The Down Payment Challenge

Here's where assumptions get tricky.

Example scenario:

Home selling for: $500,000
Assumable loan balance: $350,000
Your down payment needed: $150,000 (30%)

The gap: The difference between the sale price and the remaining loan balance is YOUR down payment.

Strategies to Bridge the Gap:

Option 1: Large Down Payment

Come up with $150,000 cash
No additional financing needed
Simplest approach
Best for: Buyers with significant cash

Option 2: [Second Mortgage](/blog/best-heloc-lenders-2026)/HELOC

Assume primary loan: $350,000 at 3.5%
Get second mortgage/HELOC: $100,000 at 9%
Your down payment: $50,000 (10%)

Math:

First mortgage: $350,000 at 3.5% = $1,571/month
Second mortgage: $100,000 at 9% = ~$805/month
Total payment: $2,376/month

Compare to new loan:

New loan: $450,000 at 7% = $2,994/month
Savings with assumption: $618/month

Challenge: Second mortgages on assumptions are harder to get. Not all lenders offer them.

Option 3: [Seller Financing](/blog/seller-financing-guide)

Seller carries a second mortgage for part of the gap
Assume loan: $350,000 at 3.5%
Seller financing: $100,000 at 6% (negotiable)
Your down payment: $50,000

Advantages:

More flexible than bank second mortgage
Seller earns interest
Negotiable terms

Disadvantages:

Seller must be willing
Seller wants cash, not an IOU
May have balloon payment (full amount due in 5-10 years)

Option 4: Negotiate Lower Sale Price

Seller reduces price closer to loan balance
Smaller gap to bridge
You pay less down

Example:

Loan balance: $350,000
Market value: $500,000
Negotiate price: $425,000
Your down payment: $75,000 (instead of $150,000)

Trade-off: Seller gets less money, you pay less down. Seller benefits from faster/easier sale.

Option 5: Wait and Save

Continue saving until you can cover the gap
Rates may change (up or down)
Window for assumption may close if seller sells to someone else

Qualifying for a Mortgage Assumption

Lenders have strict qualification requirements—you can't just take over anyone's loan.

Credit Score

FHA assumption: 580-620+ typically required
VA assumption: 620+ for non-veterans, more flexible for veterans
Strong credit preferred: 680+ gets smoothest approval

Income and DTI

Must prove ability to repay
Maximum DTI: 43%-50% depending on lender
All documentation required (W-2s, pay stubs, tax returns)

Employment

Stable employment history
2 years in same field preferred

Assets

Must have cash for down payment (gap amount)
Reserves helpful (3-6 months)

You're qualifying like a new loan—lender wants to be sure you can pay.

Advantages of Assuming a Mortgage

1. Much Lower Interest Rate

Could be 3%-4% lower than current rates
Massive savings over life of loan

Example:

$400,000 loan at 3.5% for 30 years: $1,796/month, $246,624 total interest
$400,000 loan at 7.0% for 30 years: $2,661/month, $557,960 total interest
Savings: $865/month, $311,336 over 30 years

2. Lower Closing Costs

$3,000-$8,000 vs. $8,000-$24,000 for new loan
Savings: $5,000-$16,000

3. Faster Closing (Sometimes)

If seller's lender is efficient
Fewer moving parts than new loan

4. Potentially Easier Qualification

Some FHA assumptions are more lenient than new FHA loans
Depends on lender

5. Assumption Can Be Selling Point Later

When you sell, your assumable low-rate loan is attractive
Helps your home stand out
Future advantage

Disadvantages and Challenges

1. Large Down Payment Required

Gap between sale price and loan balance
Could be 30%-50%+ in hot markets

2. Limited Inventory

Most mortgages aren't assumable
Finding homes with FHA/VA loans takes work
Competitive—other buyers want them too

3. Slower Process

Assumption approval: 30-90 days
Longer than new loan
Seller may not want to wait

4. Seller Must Cooperate

Not all sellers know their loan is assumable
Some don't want to deal with complexity

5. Lender May Be Difficult

Not all lenders are assumption-friendly
Process can be bureaucratic
Delays common

6. Risk of Seller's Loan Terms

You inherit their loan terms
Prepayment penalties (rare but possible)
Specific clauses you might not like

7. VA Entitlement Issues (for Seller)

If veteran seller's entitlement stays tied to loan, they may not be able to get another VA loan
Release of liability critical

Special Considerations for VA Loan Assumptions

For Veteran Sellers:

Critical: Get a release of liability from the VA lender when a non-veteran assumes your loan.

Without release:

You remain responsible if buyer defaults
Your VA entitlement stays tied to the loan
You may not be able to get another VA loan

With release:

You're free and clear
Can use VA benefit again
No liability

Always insist on release of liability in the sale contract.

For Veteran Buyers:

You CAN assume a VA loan from another veteran
You CAN assume and substitute your entitlement
Advantage: Free up seller's entitlement, making the deal more attractive

For Non-Veteran Buyers:

You CAN assume a VA loan
You must qualify with lender
Seller's entitlement may remain tied to loan (unless you're also a veteran substituting entitlement)
Be aware: Seller may be hesitant for this reason

How to Make Your Offer Competitive

When competing for a home with an assumable mortgage:

1. Get Pre-Approved for Assumption

Contact seller's lender before making offer
Get pre-approval for assumption
Shows seller you're serious and qualified

2. Larger [Earnest Money](/blog/earnest-money-explained) Deposit

Shows commitment
Reduces seller's risk

3. Flexibility on Closing Timeline

Assumptions take longer
Offer flexibility on closing date
Reduces seller's stress

4. Offer Seller Financing Incentive

Agree to competitive rate on seller carryback
Makes seller's participation more attractive

5. Cover Seller's Costs

Offer to pay seller's portion of assumption fee
Cover seller's closing costs
Sweetens the deal

6. Write Strong Letter

Explain why you want the home
Emphasize your financial strength
Make emotional connection

Is Assuming a Mortgage Worth It?

Run the numbers:

Scenario 1: Great Deal

Assumable loan: $350,000 at 3.25%
Current rates: 7.00%
Gap to cover: $100,000 (you have cash)
Savings: ~$750/month, $270,000 over 30 years
Verdict: Absolutely worth it

Scenario 2: Moderate Deal

Assumable loan: $300,000 at 4.5%
Current rates: 7.00%
Gap to cover: $200,000 (you need second mortgage at 9%)
Complex math: Blended rate might be close to current rates
Verdict: Run detailed comparison

Scenario 3: Marginal Deal

Assumable loan: $250,000 at 5.5%
Current rates: 7.00%
Gap to cover: $250,000 (need huge down payment)
Savings: ~$265/month, modest over time
Verdict: Probably not worth the hassle

Key factors:

Rate differential: Bigger gap = better deal
Loan balance remaining: Higher balance = more savings
Gap you must cover: Smaller gap = easier to bridge
Your cash position: Large down payment doable?

Alternatives to Mortgage Assumptions

Temporary Buydown (Seller-Paid)

Seller pays for 2-1 or 3-2-1 buydown
You get lower rate for 1-3 years
Easier than assumption

[Seller Concessions](/blog/seller-concessions-guide)

Seller pays your closing costs
Helps with cash flow
Simpler than assumption

Rate-and-Term Refinance Later

Get market-rate loan now
Refinance when rates drop
More conventional approach

Adjustable-Rate Mortgage (ARM)

7/1 or 10/1 ARM for lower initial rate
Plan to refinance or sell before adjustment
Lower rates than fixed

Bottom Line

Assumable mortgages are a powerful tool in high-rate environments. If you can find a home with an FHA or VA loan locked in at 3%-4% when current rates are 7%, you could save hundreds per month and hundreds of thousands over the life of the loan.

The opportunity is real—but so are the challenges:

Finding assumable loans takes work
Bridging the gap requires significant cash or creative financing
The process is slower and more complex than a traditional purchase
Sellers need to be willing and cooperative

Best candidates for assumptions:

Buyers with significant cash for large down payments
Patient buyers willing to search specifically for assumable loans
Those who can handle 60-90 day closing timelines
Financially sophisticated buyers who can structure second mortgages or seller financing

Is it worth the effort? If the rate differential is 2%+ and you can bridge the gap without stretching yourself dangerously thin, absolutely. The savings over 30 years can be life-changing—easily $200,000-$300,000+ on a typical loan.

But don't assume (pun intended) that every assumable mortgage is a good deal. Run the numbers, factor in all costs, and make sure the math works for your specific situation.

In 2026's rate environment, assumable mortgages are one of the smartest plays available—if you can find them and make the numbers work.

[[Home Buying Contingencies](/blog/contingencies-explained) Explained: Every Clause You Need to Understand Before Signing](/blog/contingencies-explained)
[[Conventional Loan Requirements](/blog/conventional-loan-requirements) 2026: Complete Guide](/blog/conventional-loan-complete-guide)
How to Get a 700 Credit Score: Step-by-Step Plan

Assumable Mortgage Guide

Key Takeaways