What Is an Assumable Mortgage and Why Should You Care?

Let me cut right to it. An assumable mortgage is when you, the buyer, take over the seller's existing home loan. Their rate, their terms, their remaining balance. It becomes yours.

Why does that matter right now? Because millions of homeowners locked in rates between 2% and 4% during 2020 and 2021. Those were historic lows. And by law, FHA, VA, and USDA loans are all assumable.

So instead of getting a new mortgage at 7% (that's what you're looking at today), you can step into the seller's shoes and keep their 2.75% rate. Same house, same loan, wildly different monthly payment.

The Math That Makes This Click

Let's run a real example. Say you're looking at a $450,000 home. The seller has an FHA loan with $350,000 remaining at 2.75%.

New mortgage at 7%: Your payment on a $427,500 loan (5% down) would be about $2,844 per month.

Assumable mortgage at 2.75%: Your payment on the $350,000 balance would be about $1,578 per month.

That's a difference of $1,266 every single month. Over the remaining 25 years of the loan, you'd save over $379,000 in total interest.

I know those numbers sound too good to be true. Run them yourself if you don't believe me. A mortgage calculator will confirm it.

Which Loans Are Assumable?

Three types:

• **FHA loans** (Federal Housing Administration): Assumable by anyone who meets FHA credit and income requirements.
• **VA loans** (Veterans Affairs): Assumable by both veterans and non-veterans. Yes, you read that right.
• **USDA loans** (Rural Development): Assumable with lender approval.

Conventional loans? Generally not assumable. There are rare exceptions (divorce, death, transfers), but for 99% of buyers, we're talking FHA, VA, and USDA.

The good news: there are millions of these loans out there. In Colorado alone, I'm tracking over 1,100 properties with assumable mortgages right now.

How Is This Different From a Regular Home Purchase?

The big difference is you're not getting a new loan. You're taking over an existing one. That means:

• **No origination fees.** The loan already exists.
• **Often no appraisal required.** Depends on the servicer, but many skip it.
• **Lower closing costs overall.** You're saving thousands compared to a traditional purchase.
• **Shorter remaining term.** If the seller has been paying for 5 years, you've got 25 years left, not 30. That means you own the home outright sooner.

The catch? You need to cover the equity gap. That's the difference between the purchase price and the remaining loan balance. In our example above, that's $100,000 ($450K price minus $350K loan balance). You cover that with cash, a second mortgage, or a HELOC.

And yes, second mortgage options exist. Companies like SpringEQ offer financing with as little as 5% down on primary residences. So you're not stuck needing six figures in cash.

The Process (It's Not Instant, But It Works)

Here's what the assumption process looks like:

1. **Get pre-screened.** You'll need to qualify with the loan servicer. For FHA, that typically means a 580+ credit score (most servicers want 620-640) and a debt-to-income ratio under 50%.
2. **Find an assumable property.** That's where I come in. I track every assumable listing in Colorado.
3. **Make an offer.** Just like a regular purchase, except your offer mentions the assumption.
4. **Submit the assumption package.** This goes to the loan servicer. An assumption processor (like UMe or Roam) handles the paperwork and servicer communication.
5. **Close.** Typical timeline is 45-90 days. Some servicers can do 30.

I want to make it super clear: this can be a pain in the ass when it comes to paperwork. The servicers add friction. Banks don't love losing low-rate loans off their books. But with the right team pushing it through, it gets done. I've closed 7+ assumptions in a single quarter.

Who Should Consider an Assumable Mortgage?

Pretty much anyone buying a home right now. But especially:

• **First-time buyers** who want the lowest possible monthly payment
• **Investors** looking for below-market financing on rental properties
• **Anyone who's been priced out** by today's rates and needs a lower payment to qualify
• **Non-veterans** who want access to the incredible terms on VA loans (yes, you can assume a VA loan without being a veteran)

The Bottom Line

Assumable mortgages are the most underutilized tool in real estate right now. Most buyers don't know they exist. Most agents have never done one. But the math is clear: saving $800-$1,200 per month on your mortgage payment changes everything.

That's not marketing speak. That's a calculator.

Want to see what's available? Browse our Colorado listings or try the savings calculator to run your own numbers.