Assumable mortgages are growing in popularity but come with challenges, the Wall Street Journal reported.
NEW YORK — Buyers can get a 3% mortgage if they assume a mortgage from a seller with a loan backed by the Federal Housing Administration (FHA) and the Department of Veterans Affairs (VA), but the process for assuming these lower-rate mortgages can be lengthy.
The VA indicates that mortgage companies can take more than 45 days to issue a decision on a mortgage assumption. Some of the applications also can be rejected after waiting for the process to conclude. Mortgage companies also earn less when dealing with loan assumptions than they would on a new mortgage at a higher rate.
Home buyers are seeking out ways to buy a home at an affordable cost, but high mortgage rates have added thousands of dollars to the monthly costs of buying a home and adjustable-rate mortgages are doing little to ease the burden.
Loan assumption applications have increased significantly in the last year or so, and, at the same time, the Consumer Financial Protection Bureau has received more complaints about the process – 149 in 2023 compared to 97 in 2022.
The VA has said that if the companies are delaying the process intentionally, they could be barred from the program in the future. These mortgage assumptions come with specific criteria, including the buyer paying the difference between a home’s sale price and the amount remaining in the mortgage and specific debt-to-income ratios.
Source: Wall Street Journal (02/04/24) Eisen, Ben; Friedman, Nicole
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