A Guide to Assumable Mortgages

In certain situations, you can pass on your current mortgage to a new owner when you sell your home. Assumable mortgages can be desirable to home buyers and advantageous to home sellers, but they come with some unique caveats that are important for both parties to understand.

What Is an Assumable Mortgage?

When a buyer assumes a mortgage, they assume the interest rate, current principal balance, remaining term length and other conditions of the seller’s existing mortgage, rather than getting a new mortgage for the home they’re purchasing.

How Does an Assumable Mortgage Work?

Lenders must approve mortgage assumptions. If a seller tries to hand over their mortgage to a buyer without lender approval, the lender can demand payment of the entire mortgage all at once from the seller.

If a buyer is approved to assume a mortgage, they’re contractually obligated to the lender of that mortgage. After closing, the seller is no longer on the hook for mortgage payments.

Potential Advantages of an Assumable Mortgage:

• An appraisal usually isn’t required for an assumed mortgage, possibly saving the buyer hundreds of dollars. A buyer may still wish to get a home inspection to find out if the home is in need of repair.
• Sometimes, assumable mortgages come with lower mortgage rates than those available on the market at the time of purchase, but this isn’t a guarantee. If an assumable mortgage carries a lower rate, the property is more desirable to buyers, and this might enable the seller to ask for a higher purchase price.
• Because most assumable mortgages are government loans, closing costs could be more affordable.

What Kind of Mortgages Are Assumable?

Most conventional mortgages are not assumable. However, loans insured by the Federal Housing Administration^® (FHA^®), backed by the Department of Veterans Affairs (VA) or United States Department of Agriculture (USDA) are assumable, if certain criteria are met.

Conventional Loans

Most conventional mortgages contain a due-on-sale clause, which allows the lender to demand the borrower pay the entire remaining loan amount upon the sale of the property. If this clause is present in the mortgage, then it is usually not eligible for assumption.

There are some exceptions, though. For instance, if the seller has an adjustable-rate mortgage (ARM) and meets specific financial requirements, their mortgage might qualify for assumption. Fannie Mae^® allows for assumable ARMs, so long as the buyer doesn’t try to convert the loan to a fixed-rate mortgage.

FHA^® Loans

FHA^® loans are assumable, so long as the lender approves the sale. A lender will typically want to make sure the buyer meets a certain credit score minimum. For newer FHA^® loans, both the buyer and seller must meet certain conditions for an assumption to occur. These conditions might include the seller having lived in the home for a specified length of time, or that the buyer go through the typical FHA^® loan application process.

VA Loans

VA loans are available to Veterans, members of the Military and their spouses. A buyer who isn’t a Military member or Veteran could be able to get a VA loan assumption, but it may make things trickier for the seller. More on this in a moment.

Depending on the conditions of the loan, a lender might be required to get the assumption approved by the regional VA loan center, which can add time to the closing process.

Sometimes a buyer might find an assumable VA loan that closed on or before March 1, 1988. In this case, lender approval is not needed for the assumption, but the seller could still be liable for payments if the buyer doesn’t hold up their end of the bargain.

An Important Note on VA Assumable Loans:
Anyone can assume a VA loan, even if they aren’t Military. However, if the seller would like their VA entitlement restored so they can buy another home with a VA loan, the only way to do that is to have their current mortgage assumed by a fellow Military member, Veteran or eligible surviving spouse. If the VA loan is assumed by someone outside of those criteria, the VA entitlement of the seller will only be the remaining balance of any previously unused entitlement benefits.

USDA Loans

USDA loans are typically available to buyers of rural homes. These loans often don’t require a down payment, and usually carry low interest rates.

Assumptions of USDA loans are typically restricted to situations where a property is changing hands between family members. In these cases, no credit review or appraisal may be called for.

To find out if your USDA loan is assumable, review your mortgage contract for an assumption clause. If you’re able to transfer your mortgage to someone new, the mortgage lender will probably want the new borrower to meet the same qualifying criteria for the mortgage.

Qualifying for a Mortgage Loan Assumption

First, confirm the mortgage in question is eligible for assumption. The buyer should be prepared to meet the same credit score and debt-to-income (DTI) criteria required of a typical buyer (unless you’re buying from a family member). Lenders might also verify employment history and assets.

See below for typical minimum requirements for common loan types:

Assuming a Mortgage After Death or Divorce

Sometimes unfortunate circumstances occur, necessitating that someone in the family assume a mortgage. These assumptions may be able to take place even without an assumption clause in the mortgage agreement.

When Someone Passes Away

An heir can take over a mortgage from a deceased relative, or they can choose to pay off the loan, refinance^†, or sell the property. Keeping the home and deed makes them responsible for mortgage payments.

Before the assumption can take place, the family member should provide documentation that proves they’re the correct heir and current owner of the property they want to assume. This includes confirmation of a Successor in Interest (SII) status from the loan servicer.

When a Divorce Occurs

If one person is awarded ownership of a home through divorce proceedings, they can assume the existing mortgage, but they will be required to go through the credit qualification process. The lender will want to make sure that the borrower now taking sole ownership of the home qualifies on their own and can afford payments.

What Does It Cost to Assume a Mortgage?

Usually, assumption fees are significantly lower than fees for a standard mortgage. The lender might charge for incidental costs, such as the credit report, title and escrow (if applicable) and other costs. Escrow costs and other fees may vary by state.

The lender might also charge a flat “assumption fee” for their services. However, certain government loans limit the amount of fees lenders can charge:

• FHA^® loans limit assumption fees to $1,800
• VA loans max out assumption fees at $300 plus local fees and the cost of a credit report

Closing costs are still required on assumptions, which can range from 2-5% of the loan amount.

How Can I Start the Assumption Process?

After you’ve confirmed that the loan in question is eligible for assumption, please fill out the assumption request form above in its entirety.

• If the assumption request is due to a death of the original homeowner, please ensure you are confirmed as a successor prior to submitting a request. Contact your loan servicing team for verification.
• If the assumption is due to a divorce, please ensure the divorce is finalized and the final decree is available prior to submitting a request. Your request will be evaluated by your servicer to confirm eligibility. If determined eligible, your request will be routed to a Licensed Loan Officer to assist you through the process.

How Long is the Assumption Process?

Processing time can vary depending on the mortgage type and the circumstances of the assumption. See table below for more details.

I Have More Questions About Assumed Mortgages

If you have more questions, reach out to one of Newrez’s mortgage experts. If you’re an existing Newrez customer with an online account, log in and navigate to your dashboard to talk with a team member via our live chat function – response times are sometimes quicker than via phone.

Federal Housing Administration® and FHA® are registered trademarks of the Federal Housing Administration. Fannie Mae® is a registered trademark of the Federal National Mortgage Association. None of the above companies are affiliated with Newrez LLC.

*Processing and closing times vary depending on the nature and complexity of the transaction.

References:

1 Conventional Loan Requirements in 2025

2 FHA Debt-to-Income (DTI) Ratio Requirements, 2024

3 VA Loan Credit Score Minimums and Lender Requirements

4 Debt-to-Income (DTI) Ratio Guidelines for VA Loans