An assumable mortgage is a type of financing arrangement whereby an outstanding mortgage and its terms are transferred from the current owner to a buyer. The buyer takes over the sellers home loan and keeps the original mortgage rate, which can be an advantage if the terms of the sellers mortgage are more attractive than the prevailing terms the buyer would be offered on a new mortgage. Not all home loans are assumable, and most conventional mortgages are not assumable. However, certain types of loans can qualify as assumable mortgages, including:

• FHA loans: All FHA loans are generally assumable, as long as the lender approves the sale.

• VA loans: All VA loans are assumable, but with additional rules and requirements that govern exactly how. Loans originated before March 1, 1988, are “freely assumable,” which means the assumption doesn’t have to be approved by anyone. Loans originated after March 1, 1988, are assumable as long as the lender approves and the buyer is deemed creditworthy and pays a processing fee.

• USDA loans: All USDA 502 mortgages are assumable by a creditworthy buyer, but as a new rate and terms assumption.

Its important to note that even if a mortgage is assumable, the mortgage lender will typically hold the new borrower to the loan’s eligibility requirements.