A loan assumption is when a buyer takes over the existing mortgage of a financed property, including the terms and balance of the mortgage, from the seller. The buyer must be qualified under lender or guarantor guidelines. The assumption of a mortgage by the purchaser is typically included as part of the deed, although there is no requirement that it has to be in writing. In most jurisdictions, an explicit assumption is required. If a deed is silent or ambiguous on the matter, the court will assume the purchaser did not intend to assume the mortgage. However, some allow the assumption to be implied based on the behavior of the parties.

The loan assumption process varies depending on the type of mortgage. FHA, VA, and USDA loans are assumable when certain criteria are met. In the case of a VA loan being assumed, if the assuming qualified buyer is a non-veteran, the seller’s VA entitlement will remain tied to the assumed property and therefore cannot be used by the veteran to purchase another property until the assumed loan is paid in full. Conventional ARM loans may be assumable, but under specific conditions.

It is generally necessary to obtain consent from the lender prior to the assumption process. Transfer of property with an existing mortgage loan that is made without the lenders consent is sometimes referred to as a sale "subject to" the existing loan. In most cases, this type of transfer does not avoid the lenders right to call the loan due under the due-on-sale provision in the loan.

Assuming a mortgage can be a valuable option for those looking for the possibility of a lower interest rate and a simpler home buying process. However, mortgage assumption is subject to credit approval, much like with a traditional home loan.