Guide To FHA Home Loans: How Assumable FHA Mortgages Can Make You Money
When most people are looking for a new house to buy, the least of their concerns is thinking about when they want to sell it.
Even though you may be completely excited about getting a new home, you need to think about all the details, especially if you’re considering getting an FHA financing. After all, if assumable FHA mortgages can allow you to have a competitive edge, in the end, this will mean more money for you.
Why Should You Take Into Account Assumable FHA Mortgage And How Much Is It Worth?
Assumable FHA mortgages may or may not have value when you’re trying to sell your house. When the mortgage rates are lowering, this has no value for the seller. However, in case they are rising, this can mean you have a true competitive edge on your side. Why?
Let’s say that the current market mortgage rate is at 4%. If a house comes with a 3% assumable mortgage, this means that it is a lot more valuable than one that doesn’t have this kind of financing.
When someone is comparing your home and your neighbor’s home to buy, and considering that you have an assumable FHA and he doesn’t, the truth is that it will be a much better deal for the buyer to buy your home and not your neighbor’s. Besides, you also have some space to increase your sell price or to sell it faster.
How Can Te Buyer Assume Your FHA Mortgage?
All the loans that were originated before December 1, 1986, any FHA mortgage could be assumed by the buyer without any extra requirements. However, loans generated on this date or after it require that the buyer needs to to qualify.
FHA is very clear stating that “Assumptions without credit approval are grounds for acceleration of the mortgage.” This means that the buyer can even lose the house for foreclosure.
However, don’t be scared about this. The reality is that the assumption process is simple and the buyer won’t even need to pay for any appraisal. The fees cannot exceed the $900 and the process usually takes a lot longer and is more costly when it is for a new origination.
Transferring Your Assuming FHA To The Buyer:
Even though the transfer process is very easy, make sure that you follow every FHA procedures or you may get into a lot of problems afterwards.
The first thing you need to do is to tell your lender to complete a HUD-92210 form, a Request for Credit Approval of Substitute Mortgagor, or any other similar proprietary form. This will release you from your loan. However, your lender will also need to fill the Approval of Purchaser and Release of Seller, a HUD-92210.1, or any other similar form. This is a formal release of liability. Only your lender can release you from the liability and he will need to release both parties as soon as he approves the assuming borrower.