If you've been watching mortgage rates climb past 7%, you might be wondering if there's a way to buy a home without locking in today's historically high rates. There is — and it's called an assumable mortgage.
The basics
An assumable mortgage is exactly what it sounds like: you assume (take over) the seller's existing home loan. When you do, you inherit their interest rate, remaining balance, and repayment terms. If the seller locked in a 2.5% rate in 2021, you get that same 2.5% rate — even though new loans are being issued at 7%+.
Which loans are assumable?
Not all mortgages can be assumed. Only government-backed loans are assumable:
- FHA loans — Insured by the Federal Housing Administration. The most common type of assumable loan.
- VA loans — Guaranteed by the Department of Veterans Affairs. Can be assumed by both veterans and non-veterans.
- USDA loans — Backed by the U.S. Department of Agriculture for properties in eligible rural areas.
Conventional loans (backed by Fannie Mae or Freddie Mac) almost always have a "due-on-sale" clause that prevents assumption. This means the vast majority of assumable opportunities are government-backed loans.
How much can you save?
The savings depend on the rate difference between the assumed loan and current market rates. Here's a simplified example:
- Home price: $500,000
- Remaining loan balance: $400,000
- Seller's rate: 3.0% (assumed) vs. 7.0% (new mortgage)
- Monthly payment difference: approximately $764/month
- Total interest savings over the life of the loan: approximately $389,000
What is the equity gap?
The equity gap is the difference between the home's sale price and the remaining loan balance. This is the amount you need to bring to the table — similar to a down payment on a traditional purchase.
For example, if a home is listed at $500,000 and the remaining balance is $350,000, the equity gap is $150,000. You can cover this with cash, a second mortgage, or sometimes seller financing.
The assumption process
- Find a listing — Browse assumable mortgage listings on Passage.
- Run the numbers — Use the equity calculator to understand your monthly savings and total costs.
- Apply with the servicer — The loan servicer (not the original lender) reviews your creditworthiness. This typically involves income verification and a credit check.
- Close the deal — Once approved, you close on the home and the loan transfers to your name at the original rate and terms.
The process typically takes 30–60 days for FHA loans, though VA and USDA assumptions can sometimes take longer depending on servicer capacity.
Who can assume a mortgage?
Anyone can assume an FHA or USDA loan, provided the servicer approves you. For VA loans, both veterans and non-veterans can assume the loan — though there are implications for the seller's VA entitlement if a non-veteran assumes the loan.
There is no universal minimum credit score set by FHA or VA for assumptions, but individual servicers commonly require scores of 580–620+.
Common misconceptions
- "Only veterans can assume VA loans." — False. Anyone can assume a VA loan with servicer approval.
- "The rate can change during assumption." — False. The rate is fixed and transfers exactly as-is.
- "Assumptions are rare." — While not mainstream, they're growing rapidly as buyers seek alternatives to high rates.
Is an assumable mortgage right for you?
Assumable mortgages are ideal if you have enough cash (or access to a second loan) to cover the equity gap and want to lock in a rate significantly below current market rates. The savings can be substantial — hundreds of dollars per month and hundreds of thousands over the loan's life.
Ready to explore your options? Browse assumable listings on Passage or learn more about how the process works.