Navigating Loan Assumptions with Wells Fargo

Taking over an existing mortgage loan through a process called loan assumption can be a great way for creditworthy borrowers to buy a home with little or no down payment. Wells Fargo, one of the largest mortgage lenders in the U.S., does permit assumptions on some of its loans. Here’s what you need to know about assuming a Wells Fargo mortgage.

What is a Loan Assumption?

A loan assumption allows a new borrower to take over the mortgage of the existing homeowner. The new borrower assumes responsibility for making the remaining monthly payments and becomes the owner of the home.

The biggest benefit of assuming a mortgage is that it lets you buy a home without coming up with a down payment or closing costs You take over the seller’s remaining loan balance and loan terms

Loan assumptions make the most sense when mortgage rates are rising. Assuming an existing low-rate loan can save you thousands of dollars over the life of the mortgage compared to refinancing at a higher rate.

Which Wells Fargo Loans are Assumable?

Not all mortgages can be assumed Wells Fargo allows assumptions on some fixed-rate FHA loans and certain older fixed-rate conventional loans

You generally cannot assume an adjustable-rate mortgage (ARM) or most conventional fixed-rate loans originated after 1989. Wells Fargo stopped allowing assumptions on new mortgages in 1989.

To find out if your Wells Fargo loan is assumable, check your mortgage paperwork or call Wells Fargo at 1-800-340-0570.

Wells Fargo Loan Assumption Requirements

While assuming a mortgage can save you money, you must meet Wells Fargo’s eligibility requirements:

Creditworthiness: The new borrower must have good credit and qualify based on debt, income, and assets. A co-borrower may be added to help you qualify.
Down payment: No down payment is required, but you will need funds to cover closing costs.
Occupancy: For FHA loans, you must plan to move into the home as your primary residence.
Loan seasoning: The existing loan must be at least 12 months old before it can be assumed.

Meeting the requirements for an assumption takes time. You’ll need to provide documents to prove income, assets, and credit. Wells Fargo says it typically takes 30 days just for initial approval.

The Loan Assumption Process with Wells Fargo

Here are the basic steps to assume a Wells Fargo mortgage:

Find an assumable loan: Work with a real estate agent to identity homes with assumable financing. Wells Fargo can tell you if the mortgage is assumable.
Review loan terms: Compare the interest rate and monthly payments to rates and terms for a new loan. Assume the mortgage only if it makes financial sense.
Submit your application: Provide documents to show income, credit, and assets to meet eligibility requirements.
Get approved: Wells Fargo will review your application and let you know if you qualify in approximately 30 days.
Complete the sale: Once approved, move forward with the home purchase. The home seller transfers title and ownership to you.
Pay closing costs: While there is no loan fee, you will need to pay title insurance and filing fees. Budget 1-2% of the loan amount.
Make payments: The mortgage servicer will transfer the loan to you. You begin making the monthly payments.

Wells Fargo says the entire assumption process can take up to 4 months. Build extra time into your homebuying timeline.

Pros and Cons of Assuming a Wells Fargo Mortgage

Assuming an existing Wells Fargo mortgage has several benefits:

Pros

Requires little or no down payment
Skips loan fees and closing costs
Locks in a low, fixed interest rate
Simpler process than a cash-out refinance
Allows you to buy a more expensive home

Cons

Need good credit to qualify
No flexibility to adjust loan terms
Closing can take several months
Limited to certain older loan types
Pay closing costs on the home purchase

Talk to a Wells Fargo loan officer to discuss whether loan assumption makes sense for your situation. Arm yourself with information so you can make the best decision.

Tips for Getting Approved to Assume a Wells Fargo Mortgage

Because Wells Fargo has strict requirements, you need to be well-qualified to assume one of their mortgages. Here are tips to boost your chances of getting approved:

Have a co-borrower: Adding a co-signer with good credit and income improves approval odds.
Pay down debts: Reduce credit card balances and other debts so your DTI ratio is below 50%.
Check your credit: Review credit reports and dispute any errors that hurt your scores.
Watch spending: Don’t apply for new credit or make big purchases while your loan is being reviewed.
Document income: Have paystubs, tax returns, and bank statements ready to show your earnings.
Save for closing: Set aside funds to cover title insurance fees and other closing costs.
Get pre-underwritten: Ask the seller to have the loan pre-approved for assumption so it’s ready to transfer.

With proper preparation and patience, you can successfully navigate the process to assume a Wells Fargo mortgage. Their experienced loan officers will help guide you through the documentation, approval, and closing requirements.

Carefully weigh the pros and cons and talk to a mortgage professional before deciding if loan assumption is your best option. But for some homebuyers, taking over the seller’s financing can be the ideal way to buy a home now rather than later.

Will my escrow account transfer to Wells Fargo Home Mortgage?Yes. Your escrow account will transfer to us, along with your mortgage loan, on your transfer date.

We collect funds in an escrow account to pay:

Real estate taxes
Premiums for insurance required to protect the property, such as homeowners insurance and flood insurance

We do not collect funds in an escrow account to pay:

Interim tax bills
Homeowners association fees
Premiums for non-required insurance policies, such as separate personal property insurance
Special or added tax assessments
Other fees that are not included in your real estate tax bill
Supplemental tax bills, except in California

Will you send me a year-end IRS 1098 statement?We will send you a year-end IRS 1098 statement showing the amount of reportable mortgage interest, mortgage insurance paid (if applicable), and any real estate taxes we paid on your behalf. This statement will be mailed to you from Wells Fargo Home Mortgage no later than January 3 Please refer to your welcome package for details.

Mail your payments to the payment address listed in the important information section in your welcome letter.

Automatic Mortgage Payment Options

With our free automatic mortgage payment options, you have the opportunity to schedule automatic, electronic withdrawals that can be timed to your payday cycle:

Monthly
Twice a month (1/2 total payment)
Every two weeks (1/2 total payment)
Weekly (1/4 total payment)

Choosing weekly or every 2 weeks will help you pay off your mortgage faster, because withdrawals in addition to the amount needed to cover your monthly mortgage payments will naturally occur 2 to 5 times per year. The additional withdrawn funds will be automatically applied to your principal balance.

Note: Partial payment will not be applied to your mortgage until full payment is received. Partial payment is any amount less than the current monthly payment listed on your billing statement.

Call us at 1-800-357-6675 or you can enroll on the Make Payment screen in Wells Fargo Online.

You can enroll in Wells Fargo Online at no additional cost, between 4 to 7 business days after your transfer date. Please refer to your welcome letter to see when your account information will be available.

Want to enroll? Your account information is typically available in our system 4 to 7 business days after your transfer date. You can enroll by completing a brief, one-time enrollment process.

Already enrolled? Sign on with your existing Wells Fargo username and password.

Automated phone payments: Please call us at 1-800-357-6675, 24 hours a day, 7 days a week.
Customer Service payment assistance: Please call us at 1-800-357-6675, Monday – Friday, 7:00 am – 10:00 pm; and Saturday, 8:00 am – 2:00 pm Central Time.

After your transfer date, youll be able to make payments at Wells Fargo branches. Find your nearest branch. Please note: No other Wells Fargo locations can accept payments, including Wells Fargo Home Mortgage offices.

Loan Assumption – What You Need To Know Before Assuming a Loan

FAQ

How does a loan assumption work?

An assumable mortgage works much the same as a traditional home loan, except the buyer is limited to financing through the seller’s lender. Lenders must typically approve an assumable mortgage. If done without approval, sellers run the risk of having to pay the full remaining balance upfront.

Does loan assumption hurt your credit?

You’ll still need to pay the seller the remaining cost of the home, either out of pocket or with another loan. Seller might still be responsible for the debt: If the buyer doesn’t make payments and your lender hasn’t sufficiently released you from the debt, your credit could take a hit.

How do I know if my loan is assumable?

Your loan contract will include an assumption clause if the loan is assumable. If, instead, you find a due-on-sale clause, your mortgage is not assumable (except for certain conditions like death or divorce).

What does it cost to assume a loan?

How much does a loan assumption cost? You’ll have to pay closing costs on a loan assumption, which are typically 2-5% of the loan amount. But some of those may be capped. And you’re unlikely to need a new appraisal.

What is a mortgage assumption?

A mortgage assumption is when a new borrower takes over an existing borrower’s mortgage and becomes responsible for paying off the remaining loan balance over the remaining term. Depending on the loan type and transfer circumstances, the new borrower could take on the existing mortgage rate.

How do I acknowledge payment assistance & mortgage assumption terms?

Use this form to acknowledge the following payment assistance and mortgage assumption terms. You as the borrower and any co-borrowers must sign, date, and return this form within 30 days from today’s date. What you need to know • A confirmed successor in interest has applied for payment assistance on your loan.

What is loan assumption?

Loan assumption is when a buyer takes over the current owner’s mortgage while the loan’s terms — including the repayment period and interest rate — remain the same. This can help people get into a home at a lower interest rate even as the housing market around them becomes more expensive.

How can you determine if a mortgage is assumable?

You can find out if a mortgage is assumable by reviewing the mortgage or deed of trust. The mortgage servicer will release the existing borrower’s liability and the existing borrower will transfer the property deed to the new borrower once the assumption is approved. Why Use an Assumable Mortgage?