Whether youre a first-time homebuyer, moving to a new home, or want to refinance your existing conventional or FHA mortgage, the FHA loan program will let you purchase a home with a low down payment and flexible guidelines.580 Credit Score- and only -3.5% Down RELATED ARTICLES
FHA loan limits were established to define how much you can borrow for a HUD-backed mortgage. Each state has different limits, so be sure to look up your state to understand what is available for your FHA home loan.
For , the FHA floor was set at $498,257 for single-family home loans. This minimum lending amount covers most U.S. counties. The FHA ceiling represents the maximum loan amount and is illustrated in the table below.
Also for 2024, the FHA ceiling was set at $1,149,825 for single-family home loans. This represents the highest amount that a borrower can get through the FHA loan program. It applies to high cost areas in the United States and is illustrated in the table below.
Paying the upfront costs of buying a new home can be challenging. To help overcome this hurdle, many local and state agencies offer down payment assistance in the form of grants or second mortgages.
FHA-insured mortgages are unique in the mortgage world because they are assumable under certain conditions This means that when a homeowner with an FHA loan sells their property, the buyer may be able to take over or “assume” the existing FHA mortgage instead of having to get their own new loan.
Assumability can be a major perk for both buyers and sellers when it comes to FHA loans. As a buyer, you may be able to get into a home without having to qualify and close on a brand new loan. As a seller, having an assumable loan could make your property more attractive to buyers who want to skip the loan process.
However, FHA mortgages are not universally assumable in all cases. There are important restrictions borrowers need to be aware of when it comes to assuming an FHA loan. Let’s take a closer look at how it works.
FHA Loan Assumability Overview
The FHA allows assumability of its mortgages under certain circumstances based on factors like:
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Date of Origination: Loans originated before December 1, 1986 are generally freely assumable without lender approval. Loans after this date have restrictions.
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New Borrower’s Credit For loans after December 1, 1986, the new borrower must be approved by the lender based on a creditworthiness review
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Loan Purpose: Investors or secondary home buyers may need to pay down the balance to meet LTV limits in order to assume the loan.
So in short, FHA loans can potentially be assumed, but borrowers must meet eligibility criteria, and loans from recent decades have more restrictions. The lender ultimately decides whether or not an assumption is approved.
Now let’s take a deeper look at how it works.
Detailed FHA Assumability Rules
As mentioned above, FHA mortgages fall into different categories when it comes to assumability based primarily on their origination date. Here are the key details borrowers should know:
Pre-1986 FHA Loans
FHA loans originated prior to December 1, 1986 are generally freely assumable without lender pre-approval. The lender cannot block the assumption from happening as long as the new borrower is eligible and agrees to take over the loan.
Key Points:
- No credit check or lender pre-approval required
- Original borrower automatically released from liability
- Very few restrictions on who can assume loan
This lenient policy makes older FHA mortgages extremely easy to assume. Essentially anyone who is eligible for an FHA loan can step in and take over the mortgage with minimal hassle.
Post-1986 Loans Before 1989 Reform Act
FHA mortgages originated between December 1, 1986 and December 15, 1989 have moderate assumability restrictions.
The key requirements are:
- New borrower must be creditworthy and qualify with lender
- Original borrower must request release from liability
So the lender does need to approve the new borrower by doing a credit check to verify they are financially stable enough to assume the loan. But as long as they meet those qualifications, the process is still relatively straightforward.
Loans After 1989 Reform Act
FHA mortgages originated on or after December 15, 1989 have the most restrictive assumption policies.
These loans require:
- Mandatory credit check of new borrower
- Release of original borrower still required
- Assumptions may trigger due-on-sale clause if new borrower is not approved
- Investors cannot assume without exception
The creditworthiness review is mandatory for all assumptions on post-1989 FHA loans. The lender can decline the assumption if the new borrower does not meet qualification standards.
Additionally, investors are barred from assuming these loans unless they meet limited exemption criteria. There are also certain family transfer situations where assumptions are still allowed, such as inheritance.
Tips for Assuming an FHA Mortgage
If you’re considering buying a home with an assumable FHA loan, keep these tips in mind:
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Get pre-approved – Treat it like a regular mortgage application to ensure you will qualify and pass the lender’s credit check.
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Review restrictions – Check with the lender to see if the loan can be freely assumed or if qualifications apply.
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Compare costs – Make sure the costs of assuming the FHA loan (application fees, rate adjustment costs, etc) are less than getting a new mortgage.
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Consider appraisal – Even if not required, consider getting an appraisal to determine the property’s current value and loan-to-value ratios.
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Consult professionals – Work with a real estate agent and loan officer to navigate the process and avoid pitfalls.
Assuming an FHA loan can be tricky, but is manageable if you understand the rules and work with experienced professionals. Take the time to determine if it’s the right option before committing to buy a home with an assumable FHA mortgage.
Frequency of Entities
- FHA loans – 22
- December 1, 1986 – 3
- Assumable – 16
- Originated – 5
- Lender – 10
- Borrower – 10
- Creditworthiness – 4
- Restrictions – 6
- Qualify – 3
- Pre-approval – 3
- Release from liability – 3
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Whether youre a first-time homebuyer, moving to a new home, or want to refinance your existing conventional or FHA mortgage, the FHA loan program will let you purchase a home with a low down payment and flexible guidelines.580 Credit Score- and only -3.5% Down RELATED ARTICLES
FHA loan limits were established to define how much you can borrow for a HUD-backed mortgage. Each state has different limits, so be sure to look up your state to understand what is available for your FHA home loan.
For , the FHA floor was set at $498,257 for single-family home loans. This minimum lending amount covers most U.S. counties. The FHA ceiling represents the maximum loan amount and is illustrated in the table below.
| FHA Limits (low cost areas) | |||
| Single | Duplex | Tri-plex | Four-plex |
|---|---|---|---|
| $498,257 | $637,950 | $771,125 | $958,350 |
Also for 2024, the FHA ceiling was set at $1,149,825 for single-family home loans. This represents the highest amount that a borrower can get through the FHA loan program. It applies to high cost areas in the United States and is illustrated in the table below.
| FHA Limits (high cost areas) | |||
| Single | Duplex | Tri-plex | Four-plex |
|---|---|---|---|
| $1,149,825 | $1,472,250 | $1,779,525 | $2,211,600 |
Paying the upfront costs of buying a new home can be challenging. To help overcome this hurdle, many local and state agencies offer down payment assistance in the form of grants or second mortgages.
Are FHA Loans Assumable
FAQ
What are the requirements to assume an FHA loan?
Are current FHA loans assumable?
Can you take over someone’s FHA loan?
Can I transfer my FHA loan to someone else?
Is an FHA loan free assumable?
For example, “If the loan application was signed by the borrower before December 1, 1986, the FHA-insured mortgage generally contains no restrictions on assumability.” That information is found in HUD 4155.2 Chapter Three, and it means that the FHA loan that meets that standard is “freely assumable”.
Is an FHA assumable loan a bad idea?
An FHA assumable loan can be a bad idea for a seller if they don’t get a written release of mortgage liability from the lender. If the original mortgage is assumed without the lender’s knowledge and consent, then as far as the lender is concerned, the seller is responsible for the loan and anything that may go wrong, including default.
Are all types of mortgage loans assumable?
Not all types of mortgage loans are assumable. Conventional loans cannot be assumed, for example, but FHA and VA loans can Not just anyone can assume an existing mortgage. You still have to apply with the lender and qualify for the loan Remember, when you assume a mortgage you’re taking over the homeowner’s remaining loan balance.
What is an assumable loan?
An assumable loan is a type of mortgage that can be transferred from a home seller to a buyer. This means as a buyer, you have the opportunity to take over the seller’s existing mortgage, along with its current interest rate, repayment period, and remaining balance.
Are all FHA-insured mortgages assumable?
processing a release of liability. All FHA-insured mortgages are assumable. Mortgages originated before December 1, 1986 generally contained no restrictions on assumability, while those originated after that date have certain restrictions. creditworthiness review of the assumptor. To determine what restrictions legal documents.
Is an assumable mortgage a good idea?
If the existing loan has a lower rate than the market is currently offering, an assumable mortgage can be incredibly attractive—especially if the loan balance is high relative to the home’s value. This is because the existing balance is what has the lower assumable rate.