"Did you buy your house during the pandemic years? Congratulations, there's a good chance you have a dirt cheap mortgage rate. Perhaps below 3% about half of today's average for a 30-year fixed mortgage. For would-be buyers who missed that golden window, it can feel like they lost their opportunity to afford a house. But it turns out there is a way to turn back the housing market clock: It's called an assumable mortgage."
"About 6 million homes in the U.S. have both an assumable mortgage and an interest rate below 5%, according to an estimate by Assume List, which helps buyers find these homes for sale and navigate the buying process. But there are some caveats. First, not all mortgages qualify for this kind of transfer and even when they do, buyers and sellers don't always realize it. Second, the process can be time-intensive and require a substantial cash down payment."
"While most conventional mortgages are not assumable, government-backed mortgages are. That includes VA loans, or those granted through the Department of Veterans Affairs, meaning they are often linked to homes owned by vets. FHA loans, from the Federal Housing Administration, which often go to first-time home buyers without a ton of cash, can also be transferred. About 18% of new mortgages issued in 2020 were VA and FHA loans."
Assumable mortgages let a buyer take over a seller's existing mortgage and its lower interest rate, making monthly payments more affordable. These transfers can attract more offers and potentially higher sale prices while increasing market activity. Approximately 6 million U.S. homes have assumable loans with rates below 5%. Only government-backed loans, such as VA and FHA mortgages, are generally assumable; most conventional loans do not qualify. The process can be time-consuming, may require a substantial cash down payment, and many homeowners and buyers remain unaware that assumption is an option.
Read at www.npr.org
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