How some homebuyers are snagging rare, sub-4% mortgages

As mortgage rates continue to hover around 7%, many homebuyers are exploring alternative financing options to make their dream of homeownership a reality. One such option gaining attention is the "assumable mortgage," which allows a buyer to take over the seller's existing mortgage along with the home.

Assumable mortgages are typically government-backed loans, including FHA, VA, and USDA mortgages. According to data from Intercontinental Exchange, approximately 12.2 million outstanding mortgages fall into this category, but only 6.8 million have rates below 4%. The pool of potential assumable mortgages may be even smaller, as roughly two-thirds were originated within the past 3.5 years, indicating that those borrowers may not be ready to sell just yet.

For buyers who find a home with an assumable mortgage, the process works as follows:

1. Identify a home with an assumable mortgage: Look for listings that specifically mention the availability of an assumable mortgage or work with a real estate agent who can help you find such properties.
2. Qualify for the assumption: The buyer must meet the lender's requirements for credit score, debt-to-income ratio, and other financial criteria to assume the mortgage.
3. Determine the down payment: The required down payment is the difference between the purchase price and the seller's remaining loan balance. For example, if you're buying a $400,000 home with a $200,000 mortgage balance, you would need to pay the remaining $200,000 in cash or through a second mortgage.
4. Complete the assumption process: Work with the lender to complete the necessary paperwork and pay any associated fees to finalize the mortgage assumption.

While assumable mortgages offer a unique opportunity for some buyers, the process can be complex, and mortgage servicers may be reluctant to process these transactions due to the limited fees they can charge. In 2023, only 6,000 mortgage assumptions were completed, according to the New York Times, with 3,896 so far in 2024.

If you're interested in learning more about assumable mortgages and whether they might be a good fit for your homebuying journey, please don't hesitate to contact us. Our experienced team is here to guide you through the process, answer your questions, and help you find the best financing solution for your unique situation. Call us today at [insert phone number] to schedule a consultation and take the first step toward making your homeownership dreams a reality.