The appeal of assumable mortgages is undeniable, especially when we evaluate closing rates inside the Sunshine State and compare the rates locked in between 2020 and 2022.
If a buyer assumes a 3% mortgage on a $400,000 home over getting a new loan at 7%, they can save hundreds of dollars per month. As such, many homebuyers recognize the financial benefits of assuming a seller’s existing mortgage gain, and their choices have left a mark in Florida’s housing market.
This is prompted by several factors that are unique to the state, and homeowners need to understand all these complexities before choosing assumable loans over regular closings.
An assumable mortgage allows homebuyers to take over the seller’s loan after paying the difference between the home price and the mortgage balance. This includes other contractual payments like original interest rate, remaining balance, and loan terms.
As explained by Investopedia, this means that the buyer can acquire a property without having to get a new mortgage for the full price (and potentially secure a lower interest rate)
All the following mortgages are assumable:
Conventional loans, on the other hand, are typically not assumable. These loans typically have a due-on-sale clause in their contract, demanding full payment of the loan before the property is sold or transferred to someone else. This way, lenders can protect their investment, and sellers can’t get away with selling a property without paying their debt.
The main draw of assumable mortgages becomes obvious when you follow the process. Let’s say that a property was purchased between 2018 and 2022, and locked in at a 2.75% rate with a VA loan. Then, the buyer can inherit that 2.75% rate, lowering the monthly principal and interest on that loan. A large percentage of Florida homeowners who bought or refinanced between 2020 and 2022 have FHA or VA loans with rates below 4%.
Both types of loans are in high demand, with VA appealing to the state’s large veteran community in areas like Tampa, Jacksonville, and South Florida. Meanwhile, Roam and other similar platforms have emerged to make this option more accessible to buyers, providing listings of assumable homes on sale with FHA and VA loans.
This way, Florida’s housing market boasts an enviable inventory for assumable loans when compared to other U.S. states.
A Florida title company will go over these problems with you and help you prepare accordingly if you wish to go ahead with the closing.
Buyers can also get a second mortgage loan with a credit union or a community bank since this isn’t an option for most conventional lenders.
Many steps set an assumable mortgage apart from regular closings, but that doesn’t rule out the importance of doing due diligence when it comes to the property title. Buyers need to verify that the title is clear before moving forward with the closing, and the best way to go about it is with the assistance of a title and escrow company.
The title search will uncover any issues that need to be resolved so they don’t lead to legal disputes later on. These include liens, judgements, or encumbrances on the property.
From there, we recommend getting insurance coverage for good measure, since there’s always a chance of discovering a hidden claim or fraudulent documents after the closing. Most lenders demand lender title insurance before granting the loan, and for a good reason. This policy protects them from losing any money in the event of fraud or a lengthy legal process.
Likewise, we recommend getting a separate title insurance policy to protect your rights as the property owner. An owner’s title insurance policy will keep your property safe for as long as you own it, and you won’t have to worry about any of your investment going to waste right after a successful closing.
If you’re assuming a seller’s existing mortgage gain, we can’t overstate the risk of skipping owner’s title insurance. Considering the down payment of the seller’s equity, along with other closing costs, title insurance is the best way to protect your savings. A Florida title company can point you to the best insurance plans according to your priorities and budget.
Real estate transactions require a lot of attention to detail, even when navigating a smooth process. The importance of expert assistance is all the more evident when we talk about assumable mortgages since they’re more complex than standard closings.
On top of confirming that you’re working with a clear title, you need to ensure that the assumption is properly documented beforehand. This is where Key Title & Escrow can help you streamline the process. With 24+ years of closing experience in Florida, we know how to adapt our services to the requirements of assumable mortgages, and we’re quick to address any potential risks involving VA eligibility, lender delays, etc.
Our professional team is ready to coordinate with the lender/servicer, closely monitoring the status of the assumption so you’re never caught off guard by any inconveniences.
Don’t hesitate to contact Key Title & Escrow for a consultation if you’re interested in assumable mortgages and want to make an informed decision. You can call (305) 235-4571 / toll-free at (800) 547-0006, or you can send us a message via the website’s contact form.
Generally, no, because of the contract’s due-on-sale clause. There are certain exceptions to the clause, involving cases when the property is transferred to the owner’s children, or when a jointly owned property becomes owned by a single spouse after a divorce.
FHA loans, VA loans, and USDA loans are all assumable loans.
You must meet the current FHA, VA, or USDA loan requirements depending on the type of loan you are assuming. This typically means a minimum credit score of 580, although most lenders prefer 620-640.
Lenders usually take between 45 to 90 days to evaluate the client’s application and eligibility before approval.
If the purchase price of the home exceeds the remaining loan balance, the buyer must cover the difference.
Yes. The risk of financial loss doesn’t change when compared to regular closings, on top of the expenses created by equity gaps, the funding fees for VA loans, etc.
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