In today's real estate market, characterized by exceptionally high mortgage rates, both homebuyers and sellers find themselves in a challenging position. Sellers are often hesitant to leave their homes, bound by favorable low-rate mortgages, while buyers struggle with limited inventory and financial constraints.
However, there is a little-known solution that could benefit both parties: assumable mortgages. J Todd emphasizes the potential of these mortgages, which many agents may overlook. #Assumable #mortgages allow a buyer to take over the seller’s mortgage payments at the existing interest rate.
The primary types of assumable mortgages are #VA, FHA, and USDA loans, with VA and #FHA being the most common in Arizona. All of these can be assumable as long as you have cash and can qualify.
The concept is straightforward: a buyer applies to assume the remaining balance of the seller’s mortgage by purchasing the seller’s equity in the home. For instance, if a seller has a $590,000 home for sale backed by a 3.25% FHA or VA loan, with a loan balance of $340,000.00 - a buyer can come in and purchase the home, take over the current payments; but it does require cash. For that equity—either in cash or through a secondary loan—and continue with the seller's low mortgage rate.
Purchase price: $590,000
Exist Mortgage: $340,000
Cash/seller carry: $250,000
Closing costs: +- $40,000.00
Loan rate: 3.25%
In cases where homes have appreciated, the buyer must cover the increased value. For example, if the home's value rises to $650,000, the buyer would need to pay additional funds to the seller. This upfront cost can be significant, but it translates to substantial long-term savings due to the lower interest rate.
Not all buyers will qualify for assumable mortgages. Similar to standard mortgages, buyers must meet financial criteria. For instance, VA loan applicants need a minimum down payment of 3.5% and a credit score of at least 580. Thus, any buyer assuming a VA loan must also meet these requirements.
Financial challenges also remain a factor. Todd advises that buyers interested in assumable mortgages should have about 20% of the home’s price available in cash, along with an additional $20,000 for closing costs.
The approval process for these loans can take up to 90 days, but successful applicants can benefit from mortgage rates significantly lower than current averages.
How to find these homes?
There are several websites that research and show you what homes can qualify and are backed by FHA, VA, or USDA loans.
One site: https://app.assumable.io/?_token=LdDPqJuhLZ3DXfsLTvj7yiIheNCVL5wX6GG4ePR1&location=85254&search_mode
Assumable.io will show you properties that may qualify. Type in your address or zip code of your search requirements and you can see what is in that area.
It is not for everyone. You must have time to get the loan processed, you must qualify, you must have a lot of cash and an Agent who knows how to help!
Call me for more information:
J Todd Simpson
(480)465-1504
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