FHA Assumable Loans

What is an FHA Assumable Mortgage?

An FHA (Federal Housing Administration) assumable mortgage allows a buyer to take over the seller's existing FHA loan, including its interest rate and terms. Instead of getting a new loan at current market rates (6-7%+), you can assume the seller's original loan at a lower rate (often 2-4%), saving hundreds of dollars per month.

FHA Assumption Requirements

FHA Assumption Process

1. Find an FHA assumable home: Search for listings with FHA loans or work with a specialized agent.
2. Submit assumption application: Apply directly with the existing loan servicer, not a new lender.
3. Meet credit and income requirements: Provide documentation to prove you qualify (credit score 580+, DTI under 50%).
4. Pay equity gap and fees: Cover the difference between home price and loan balance, plus the $900 assumption fee.
5. Close and assume the loan: Transfer the loan to your name and start making payments at the assumed rate.

Pros and Cons of FHA Assumptions

Like any financial decision, assuming an FHA mortgage has both advantages and considerations. Understanding both sides helps you make an informed decision:

Finding FHA Assumable Homes in Las Vegas

Locating homes with assumable FHA mortgages requires a targeted search strategy. Here are the most effective methods for finding FHA assumable opportunities:

MLS Search Techniques

When searching MLS, look for specific keywords in listing descriptions: "FHA loan," "FHA assumable," "assumable mortgage," or "FHA mortgage." Many listing agents will mention if a property has an FHA loan, though they may not always explicitly state it's assumable. If you see "FHA loan" mentioned, it's worth asking the listing agent if it's assumable.

Working with Specialized Agents

An agent who specializes in assumable mortgages, like Dr. Jan Duffy, knows how to identify FHA assumable opportunities. They can search MLS with specific criteria, contact listing agents directly to inquire about loan types, and leverage their network to find off-market opportunities. This specialized expertise significantly improves your chances of finding assumable homes.

Direct Seller Inquiries

If you're interested in a property, ask the listing agent or seller directly if the current mortgage is an FHA loan and whether it's assumable. Many sellers don't realize their FHA loan is a valuable feature that can attract more buyers, so asking directly can reveal opportunities that aren't being actively marketed.

FHA Assumption Fees and Cost Breakdown

Understanding the costs associated with assuming an FHA loan helps you plan your budget and compare options:

Assumption Fee Details

The FHA assumption fee is capped at $900 by federal regulation. This fee covers the lender's cost of processing your assumption application, transferring the loan to your name, and handling the necessary paperwork. This is a one-time fee paid at closing, and it's significantly lower than the closing costs on a new mortgage, which can be 2-5% of the loan amount (potentially $6,000-$15,000 on a $300,000 loan).

Other Closing Costs

In addition to the assumption fee, you'll pay standard closing costs including title insurance, escrow fees, recording fees, and any prepaid items like property taxes and homeowners insurance. However, you won't pay origination fees, points, or other lender fees that come with new mortgages. Total closing costs for assumptions are typically 2-3% of the home price, compared to 3-5% for new mortgages.

Equity Gap Calculation

The most significant cost consideration is the equity gap - the difference between the home's current price and the assumable loan balance. This must be covered with cash or a second mortgage. For example, if you're buying a $400,000 home with a $280,000 assumable FHA loan balance, you'll need $120,000 (plus closing costs) to cover the equity gap. This is in addition to your down payment, if any.