A financing option we often forget about is the fact that an FHA mortgage is fully assumable by a qualified buyer. This could be an option for buyers who don't have enough cash for a down payment and sellers who can't sell because they would have to come to the table with cash to pay off their FHA mortgage.
- If sellers allow their FHA mortgage to be assumed, the buyer simply takes over their current loan and there is no need for the sellers to come up with the cash to pay it off at closing
- NO APPRAISAL is required, and since there is no new mortgage, the buyer doesn't have to pay all of the lender and title charges typical of a new mortgage
- Buyers also may save on FHA mortgage insurance rates and funding fees
- The new buyer must be approved by the lender servicing the seller's mortgage and goes through underwriting approval just as they would have to for a new mortgage
- Generally, cost of the loan assumption is in the hundreds rather than the thousands of dollars required for a new mortgage
This could be a good option when the mortgage balance is at or near a price a seller is willing to accept for sale of the property and the buyer doesn't have the funds for a down payment but is credit worthy. No required appraisal is also a potential benefit... banks don't have to approve value, only the buyers and sellers.