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Want a Lower Mortgage Rate? Take Someone Else’s Loan

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Dave and Melissa Hostetler considered lowering the list price of their Rockville, Maryland home again in June. Instead, they decided to dangle one more offer in front of potential buyers.

For the first time in years, the mortgage assumption, known as the practice, is gaining traction. This is usually allowed on government-backed mortgages like the VA program that Hosteters used to buy the house in 2019. make home more affordablesaves buyers hundreds of dollars a month Market interest rate above 5%.

“It came to market a week or two after interest rates spiked,” said Hostetler. “I missed the timing of the market”

A prospective buyer who had already toured the home decided that the deal would be sweetened by underwriting the 3.375% interest rate on a 30-year fixed VA loan. The four-bed, three-bath home sold last month for an asking price of $834,000.

Rising interest rates are causing many homebuyers to look for other ways to lower their mortgage costs.some people use Increase your down payment or switch to a variable rate mortgage We offer lower rates for the first few years. Mortgage assumptions aren’t common, but interest has increased recently, according to lenders, realtors and government officials.

In a standard home sale, the buyer takes out a mortgage at the prevailing interest rate to pay the seller. The seller uses the money to pay off his mortgage and pocket the remaining cash.

A hypothetical transaction differs in that instead of replacing an old mortgage with a new one, the old mortgage is transferred to a new owner. Since the seller is relieved of the remaining mortgage debt, that balance is deducted from the purchase amount owed to the seller. Buyer should have cash on hand to cover the difference.

If the seller pays off most of the mortgage, or if the home’s value spikes, the difference can be quite large, so the buyer may need a large down payment or a second mortgage. That means the option is not viable for many buyers, as is the sometimes restrictive and bureaucratic nature of loan underwriting.

“Interest may be skyrocketing, but we don’t know what the number of assumptions will ultimately be,” says Mortgage Insights of Veterans United Home Loans, the largest veterans lender. Vice President, Chris Burke said. He said the company has made seven assumptions since 2020, compared to more than 170,000 purchase loans.

A spokesman for the VA said it has recently been receiving more inquiries about the prerequisites for the loan. A spokeswoman for the Department of Housing and Urban Development said the agency hopes more borrowers will consider hypothetical options in the Federal Housing Administration’s loan program, but how many hypotheses will occur? It is too early to know

Recent searches for

Zillow Group Inc..

We found hundreds of listings advertising assumed loans. These are usually referenced in the property description next to the details. clapboard, below freezing refrigerator When private bathroom.

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The listing caught the eye of buyers like Coast Guard Officer Tom Slattery, who spent the summer with his wife browsing Zillow and other sites daily, looking for homes with potential loans. They recently signed a deal on a property in Alexandria, Virginia, taking advantage of the seller’s 2.75% VA loan. He estimates he could cut his monthly costs by more than a quarter of his.

“We were very happy to find that we were able to get a house that should have been the top of our budget and now feel more comfortable,” he said.

According to industry research group Inside Mortgage Finance, government-backed loans accounted for about a fifth of the more than $14 trillion in mortgage originations over the past five years. can be said to have a wide range.

But the loan assumption doesn’t work for many trades. Richard Pearrell, the real estate agent for his eXp Realty who sold the Hostetlers home, said he also recently worked with another seller who had a VA loan, but the balance was about 25% of the asking price. It was too small to create a hypothetical function. Worth it for the typical buyer.

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Everything is tailored for Hostetlers. The loan balance was about 80% of the purchase price and the buyer was planning to use a large down payment anyway. As a military veteran, Hostetler qualifies for the VA Loan Program and has used the VA Loan Program several times when he refinanced in 2020, when interest rates were dropping recently.

Although the buyer is not a veteran, the program’s guidelines allow private individuals to take over the loan using the seller’s eligibility for the program. This means that Mr. Hostetler will be restricted from taking out new VA loans until this loan is paid off. The Hostetlers and their daughter recently moved to the Austin, Texas area, but didn’t use his VA loan on the house they bought there.

Both sides of the deal had to go through the lender’s manual approval process for loan preconditions, Hostetler said. They make the sale up to the lender,

US Bancorp,

Approved the loan assumption and was able to get the green light in time for closing.

A spokesman for US Bancorp said lenders now have reserves three times higher than usual.

Purchasers must pay VA a funding fee of 0.5% of the value of the loan when underwriting a VA loan. The seller should obtain a liability waiver from the lender so as not to stay on the hook of the loan.

Adam Isaacson, vice president of TTR Sotheby’s International Realty, one of the buyer’s realtors, said: “We were all learning as you go.”

Write a letter to Ben Eisen [email protected]

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