Here’s a new twist on an old product… Assumable loans. FHA (Federal Housing Authority)
and VA (Veterans Administration) backed mortgages can be assumed as long as the borrower
qualifies. An estimated 14 million mortgages (64 % of mortgages) were refinanced during a
seven-quarter period (the COVID quarters) and this doesn’t count all of the mortgages that were
made on new homes… or previously owned homes purchased with low interest rates.
Meaning… there are a lot of homes with low interest rate mortgages out there. So, in most
cases, in order to assume a pre-existing low interest rate mortgage, a borrower has to qualify
and meet all of the assumption criteria from that loan servicer. Likely, that mortgage balance
will be a lot lower than the sales price and in order to assume the loan, the borrower will have to
come up with the difference in cash…. OR… tie in to a 2 nd trust deed to help cover the
difference. IF there is a 2 nd trust deed, the Combined Loan To Value (CLTV) will have to be
90% (ie. 10% down).
The benefit of this is (hypothetical example) on a $600,000.00 sales price that has a current
mortgage of $400,000.00 with a 3.25 % interest rate, a buyer assuming this loan would have to
come in with at least $200,000.00 in cash. But, if a 2 nd trust deed is acquired, a buyer would
only need to come up with about $60,000.00 as a down payment and the difference of
$140,000.00 would be in the form of a 2 nd trust deed. Even if the second trust deed was at was at
a much higher rate, it’s a whole lot better than paying 7.5% interest on the whole $540,000.00.
These assumable loans usually take at least 45 days to complete. This is an option to try and
hang on to the lower interest rate mortgages that are out there. (There are FHA and VA
assumable loans, each are a bit different, call me if you have any questions on this part).
FUN FACT: Thanksgiving is on November 23 rd this year. In 1863 President Abraham Lincoln
proclaimed that the last Thursday in November as a national Thanksgiving holiday and in 1941,
President Franklin Roosevelt signed a law fixing Thanksgiving to the fourth Thursday of
November (not the last Thursday).
Random Acts of Kindness: The attached flyer has some great ideas on being nice. Here are
two easy ones… Hold a door open for anyone, and smile 😃.
If you have any questions regarding this or any other real estate related matter, feel free to call,
text, message or email me 661-406-1562. If you want a quick valuation on your home, go to
thishomesvalue.com and one will be sent to you right away.
Have a GREAT DAY!
