Assuming Loan Process
Writing Offer With Assumable Loan
Listing Agent:
As a Seller’s Agent, understanding the loan assumption process is crucial when working with buyers who want to take over your client’s existing mortgage. A loan assumption is a legitimate, lender-approved transaction that allows the Buyer to assume the Seller’s current loan terms—including the remaining balance, interest rate, and repayment schedule—rather than obtaining a new loan.
Here’s how it typically works:
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Confirm the loan is assumable. Only FHA, VA, and USDA Loans are able to be assumed by a Buyer.
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Know the details: When listing a property with an assumable loan, it’s a good idea to obtain a copy of the Seller’s most recent mortgage statement. This document contains key details that potential buyers will want to review, such as the current loan balance, interest rate, monthly payment, and loan maturity date.
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Learn the current Lenders process: Not all loan servicers handle assumptions the same way. Some require the Buyer to complete an assumption application or packet before reviewing an executed contract, while others won’t begin the process until after a fully executed contract is in place. It’s best to contact the loan servicer directly and ask for the Assumptions or Mortgage Servicing Department to confirm their specific procedure and timeline.
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Timing & Follow-up: The Buyer is required to submit a complete loan application to the Seller’s lender, similar to applying for new financing. The lender will review the Buyer’s credit, income, and debt-to-income ratio to confirm they meet eligibility standards. From contract to closing, the loan assumption process typically takes 60–90 days based on experience. Keep in mind, most loan servicers have little incentive to expedite these requests, so consistent follow-up and persistence are essential to keeping the process on track.
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Closing and loan transfer. Once approved, the lender gets ready to transfer the loan into the Buyer’s name. The transaction closes through a title company just like a traditional sale, but instead of a new loan funding, the existing mortgage stays in place, now owned by the Buyer. At this point, the Seller is typically released from liability (this is especially important for VA loans to restore the Seller’s entitlement).
ASSUMPTION OF VA LOANS: When a buyer assumes a VA loan, the Seller’s VA entitlement used to secure that loan can remain tied to the property until the loan assumed by the Buyer is paid off in full, sold or refinanced. Meaning unless the Buyer is also a qualified veteran who uses their own entitlement, the Seller’s entitlement is not restored and may limit their ability to purchase another home using a VA loan.
Buyers Agent:
As a Buyer’s Agent, understanding the loan assumption process is essential when helping your clients purchase a property with an assumable mortgage. A loan assumption is a lender-approved transfer that allows your Buyer to take over the Seller’s existing loan terms—such as the balance, interest rate, and repayment schedule—instead of securing new financing. This can be especially appealing in today’s higher-rate environment when the Seller’s loan carries a lower rate.
Here’s how it typically works:
1. Confirm the loan is assumable and makes sense to your Buyer: Only FHA, VA, and USDA loans are eligible for assumption. Before submitting an offer, find out the type of loan and ask the Listing Agent for a recent mortgage statement or the info needed from the Seller to craft your offer. This provides vital information—like the current loan balance, interest rate, monthly payment, and maturity date. REMEMBER, the Buyer has to cover the difference between the current asking price and what the current loan balance is. (ex: Seller is asking $400,000 and currently owes $325,000. That means the Buyer needs to have a down payment of at least $75,000 and keep in mind closing costs and other fees incurred).
2. Learn the lender’s process: Ask the Listing Agent if they’re familiar with the mortgage servicer’s assumption process, as each lender handles them differently. Some require the Buyer to complete an assumption packet before reviewing an executed contract, while others won’t begin until after a fully executed contract is in place. Ideally, the Listing Agent should provide this information upfront, since loan servicers typically won’t speak with the Buyer or Buyer’s Agent directly until there’s an active contract, as they’re not yet a party to the transaction or the existing loan.
3. Manage expectations and stay persistent: Your Buyer will need to complete a full loan application with the Seller’s lender—similar to a new mortgage approval—so the lender can verify credit, income, and debt ratios. The process from contract to closing typically takes 60–90 days, and since servicers are rarely motivated to move quickly, consistent follow-up is key to preventing unnecessary delays.
4. Closing and loan transfer.
Once approved, the lender finalizes the transfer of the existing mortgage into the Buyer’s name. The closing is completed through a title company like a standard transaction, except no new loan funds are issued. Once finalized, the Seller is usually released from liability, especially in VA assumptions where this step restores the Seller’s VA entitlement.