Can You Assume a Conventional Loan?
No. Not in any practical sense for a standard home purchase.
Conventional loans (those backed by Fannie Mae and Freddie Mac) have due-on-sale clauses in the mortgage documents. This clause gives the lender the right to demand full repayment of the loan when the property is sold or transferred to a new owner.
In theory, a due-on-sale clause is optional. The lender "can" call the loan due. They don't "have to." But in practice, lenders almost always enforce it. They have no incentive to let a new buyer keep a 2.5% loan when they could force a new loan at 7%.
The Very Narrow Exceptions
The Garn-St. Germain Depository Institutions Act of 1982 carved out specific transfers where the due-on-sale clause cannot be enforced:
- Transfer to a spouse or children
- Transfer resulting from divorce
- Transfer into a living trust where the borrower is a beneficiary
- Transfer resulting from the borrower's death
These are family and estate planning transfers, not standard sales. If you're buying a home from a stranger on the open market, none of these apply.
Why This Matters
About 70% of all mortgages are conventional loans. That means the vast majority of existing mortgages are not assumable. This limits the assumable inventory to homes with FHA, VA, or USDA loans.
The good news: there are still millions of assumable government-backed loans nationwide. In Colorado, I track over 1,100 assumable properties at any given time. The selection is more limited than the total market, but it's substantial.
Adjustable Rate Mortgages (ARMs)
Some conventional ARMs (adjustable rate mortgages) have assumability features. This is more common with older ARM products and some portfolio loans (loans held by the originating bank rather than sold to Fannie/Freddie).
If you encounter a conventional ARM that may be assumable, read the loan documents carefully. The assumability terms, if they exist, will be spelled out in the note.
This is a niche situation. Don't count on it, but be aware it exists.
The Better Path
Instead of trying to assume a conventional loan, focus on FHA and VA loan properties. These are explicitly assumable by design, with a well-established process for transferring the loan to a new buyer.
VA loans in particular tend to have the lowest rates (many VA borrowers refinanced to sub-2.5% rates in 2020-2021) and are the most common in military-adjacent areas like Colorado Springs.
Browse the assumable inventory to see what's available with FHA and VA loans. The rates and savings are where the real opportunity lives.
Ready to Find an Assumable Mortgage in Colorado?
Browse available listings or schedule a free call with Ryan Thomson, Colorado's leading assumable mortgage specialist.
Browse Homes | Schedule a Call | (719) 624-3472
Frequently Asked Questions
What is an assumable mortgage?
An assumable mortgage is an existing home loan that a buyer takes over from the seller at the original interest rate, balance, and terms. FHA, VA, and USDA loans are assumable. Conventional loans generally are not.
How much can I save with an assumable mortgage?
On a $400,000 loan at 3% vs. 7%, you save $1,081 per month. That's $12,972 per year, and over $300,000 over the life of the loan. Real savings, not theoretical ones.
Which loans are assumable?
FHA loans, VA loans, and USDA loans are all assumable. Conventional loans (Fannie Mae, Freddie Mac) generally have due-on-sale clauses that prevent assumption. The most valuable assumable inventory comes from 2019-2022 originations.
How do I find homes with assumable mortgages?
Most MLS listings don't flag assumable loans. You need to work with a specialist or use a service that tracks FHA and VA loan inventory. Browse assumable homes in Colorado to see what's available now.
How long does the assumption process take?
Most assumptions close in 45-90 days. The main variable is the loan servicer's processing speed. Having all your documents ready upfront and working with an experienced assumption specialist helps.
What is the equity gap?
The equity gap is the difference between the home's sale price and the existing loan balance. You cover this with cash, a second mortgage, or both. Even with a second mortgage, the blended rate often beats a new conventional loan.