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.
The FHA loan program allows homebuyers to purchase a home with as little as 3.5% down and flexible credit requirements. These government-backed mortgages can be assumed by a new buyer when the home is sold.
But can you actually assume an FHA loan? What restrictions and requirements are involved when taking over someone else’s FHA mortgage?
In this comprehensive guide, we’ll cover:
- How FHA loan assumptions work
- Key dates that affect the process
- What the lender must do
- Steps for the assumptor
- Tips for a smooth assumption
Understanding the ins and outs will help you successfully assume an FHA loan.
How Do FHA Loan Assumptions Work?
An FHA loan assumption allows a home buyer to take over the seller’s existing FHA mortgage instead of getting a new loan The buyer becomes responsible for making the monthly payments and repaying the loan
The seller is released from liability, but the loan terms and lien remain the same. The assumptor does not need to refinance or qualify for a new FHA mortgage.
FHA insures the assumed loan, so it is possible to assume FHA financing. However, there are some important requirements based on origination date.
Key Dates That Affect the Assumption Process
When the original FHA loan was originated greatly impacts the assumption process.
For FHA loans issued before December 1, 1986 – The loan is freely assumable No restrictions or credit check is required
For loans issued December 1, 1986 to December 31, 1989 – The lender must assess the assumptor’s creditworthiness. The buyer will go through a full FHA qualification process.
For loans issued after January 1, 1990 – Assumptions require full lender approval and buyer qualification per the HUD Reform Act.
What Does the Lender Have to Do?
For post-1986 loans, the FHA lender must:
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Review the assumptor’s credit, income, and debt just like with a new loan.
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Determine if the buyer qualifies for the mortgage under current FHA requirements.
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Process a formal release of liability for the seller once the assumption is approved.
Lenders can contract with other Direct Endorsement underwriters if needed to process assumptions. The review must be completed within 45 days.
What Steps Does the Assumptor Take?
The buyer assuming the FHA loan should:
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Review their credit report and scores to ensure they meet guidelines.
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Gather income, asset, and other documentation needed to qualify.
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Be prepared to pay required fees and closing costs for the assumption.
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Occupy the home as their primary residence unless a hardship exception applies.
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Sign an assumption agreement taking responsibility for repayment.
Basically, the assumptor should approach it as if applying for a new FHA mortgage. Following standard FHA guidelines will make for a smooth process.
5 Tips for a Hassle-Free FHA Loan Assumption
Follow these tips when assuming an FHA loan on a home purchase:
1. Confirm the loan can be assumed – Check the origination date and review the mortgage documents.
2. Hire a real estate agent familiar with assumptions – They can help coordinate between all parties.
3. Get pre-qualified – Take the steps to confirm you’ll meet FHA requirements.
4. Negotiate assumption terms upfront – Add a contingency clause making the sale dependent on assumption approval.
5. Work closely with the lender – Provide all needed documentation to process the assumption request efficiently.
The Bottom Line
Yes, buyers can assume an existing FHA loan from the seller instead of getting their own financing in certain situations. The age of the loan being assumed dictates what restrictions apply.
If you’re buying a home with an assumable FHA mortgage, understand the requirements for both lenders and borrowers. Being proactive and working closely with all parties ensures your assumption goes off without a hitch!
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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.
Loan Assumption – What You Need To Know Before Assuming a Loan
FAQ
What are the requirements to assume an FHA loan?
Can you take over someone’s FHA loan?
How much is the FHA assumption fee?
How do I transfer my FHA loan to someone else?
Should you take out an FHA assumable loan?
An FHA assumable loan comes with benefits and drawbacks for both buyers and sellers. If interest rates have gone up since the seller took out their FHA loan, you can take advantage of the lower interest rate when you assume their mortgage. Assuming a mortgage can save you money on closing costs.
Should I assume an FHA loan?
Their insights can be invaluable in helping you understand the nuances and implications of assuming an FHA loan. The decision to assume an FHA mortgage loan should align with your financial goals, housing needs, and the potential benefits it offers in your unique situation.
Should a seller assume an FHA mortgage?
When you assume an FHA mortgage, you take over the seller’s remaining mortgage balance and existing mortgage terms. In most cases, a seller must obtain approval from their lender for the mortgage to be assumed. A home appraisal isn’t required to assume an FHA loan. This can save buyers some cash in closing costs and expedite the closing process.
Can a seller take over an FHA loan?
For most FHA and VA loans, a seller must obtain lender approval for an assumable mortgage. Here are a few things you need to know if you decide to take over an FHA loan. Newer FHA loans require that both buyer and seller meet specific criteria for an assumable mortgage.
Should you buy a home with an FHA loan?
This means, if you’re considering purchasing a home with an existing FHA loan, you may have the option to assume the mortgage along with its existing interest rate, remaining balance, and repayment period. This can be particularly advantageous in a market where current mortgage rates are higher than the rate on the assumable loan.
Is an FHA assumable mortgage a good idea?
There are scenarios when an FHA assumable mortgage isn’t a good idea for a seller or a buyer. 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.