While the dream of getting a loan with an interest rate much lower than today's is possible – it's not without its challenges!
With the recent rapid rise in interest rates, assuming a seller's existing loan at its much lower interest rate could save you hundreds of dollars a month in mortgage interest.
But of course, with great rewards come some challenges.
Assuming a loan is a time-intensive process: Be prepared for what could be a 2-3 month journey. Processing a loan assumption takes far more time than the traditional route, but the wait could be worth it for the savings!
You'll also need to find a seller willing to wait for the transaction. With sellers anxious about the current market, few may be willing to offer a loan assumption given that they often need their equity, their current house paid off to lower their debt ratios, and often, if the assumable loan is a VA loan, the seller may need their eligibility restored in order to make their next purchase.
Speaking of VA loans, one of the main reasons Veterans like them is because they can purchase with $0 down. With a loan assumption, VA or otherwise, the buyer will need to cover any difference between the current loan balance and the house purchase price plus any closing costs.
Though the benefits are undeniable, even sellers with assumable loans may not want to deal with the delays and risks they might face if they offer to let you assume their loan. Less than 1% of the current active listings in the Utah market are willing to let buyers apply to assume their assumable loan.
Dave and I also delve into the changes in the real estate market that have happened over the past few years, covering the meteoric rise in interest rates, the low supply of existing home inventory in many markets, and the unique challenges homebuyers face today.
To Buy or to Wait?
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