Great Idea

What is an assumable mortgage, are they available in the DC real estate market, and how does the process work?

Definition of an Assumable Mortgage

An assumable mortgage is one that can be transferred from the current mortgagee to a qualified buyer, reassigning the terms agreed upon when the loan was first originated.

Wiat, what?

Wait--So if a seller took out a mortgage, or refinanced when rates were at 2.0% or 2.5% I could still get that rate?

That's correct! For the balance of the existing mortgage, if it is assumable. Good luck with that in DC!

How Does It Work?

Like this:

  • An assumable mortgage allows a homebuyer to assume the current principal balance, interest rate, repayment period, and any other contractual terms of the seller's mortgage.
  • The majority of mortgage loans in DC are not assumable, so this should be a bonus, not primary criteria for your home search
  • Both buyer and seller should confirm the loan is assumable and the lender will agree to an assumption before moving forward with a contract based on this provision
  • Buyers can only assume the balance of the loan. The buyer pays the difference between the sale price and the assumable balance
  • The buyer applies to the seller’s lender to assume the seller’s mortgage proving that they meet all of the same requirements the seller had to meet in terms of creditworthiness, income, debt-to-income ratio (DTI), etc. The lender will typically charge the buyer a processing fee for underwriting and facilitating the transfer
  • At closing, the seller signs a warranty deed transferring title to the home to the buyer and the buyer signs a loan agreement and other lending documents assuming the existing loan. The buyer will also bring a second mortgage or cash to cover any difference between the loan assumed and the purchase price, along with their closing costs.
Wow who knew?

Wow, who knew?  Is Every Mortgage Assumable?

Not by a longshot.

The majority of conventional mortgages aren’t assumable, but it’s certainly worth buyers asking in the shopping phase of their home search. In the past, buyers have not concerned themselves with the type of mortgage loan the seller was carrying, but that’s now a question buyers should include this question on their list.

There are some non-conforming conventional loans that are assumable and adjustable rate mortgages (ARMs) from Fannie Mae and Freddie Mac can be assumable, but these tend to be unicorns. According to Michelle Davis, of Prosperity Home Mortgage, in crafting ARM programs, lenders start their basis of underwriting on Freddie Mac and Fannie Mae guidelines, so many ARMs carry the same restrictions against assumption that conventional 30 year-fixed loans carry. Davis says she doesn’t know of a single ARM that is assumable.

Government-insured loans such as FHA (Federal Housing Administration) and VA (Department of Veterans Affairs) are assumable as long as specific requirements are met and the seller obtains lender approval.

There Are Two Types of Assumable Mortgage Loans

"Simple" and "Novation"

They have different implications for the  buyer, seller and lender:


  • This is a private transfer of responsibility for the mortgage from seller to buyer to which the mortgage lender isn’t privy. The lender doesn’t put the buyer through the underwriting process or participate in transferring the loan, so if the buyer fails to make payments or otherwise breaches the mortgage contract with the lender, both buyer and seller are liable.


The mortgage lender agrees to and participates in the full transfer of liability from seller to the buyer for the existing loan. The lender is able to take the buyer through the underwriting process, so is willing to release the seller from all future responsibility for the mortgage.

And here are the bulletpoints on FHA and VA assumable mortgage loans:


  • FHA loans are assumable when seller and buyer both meet the requirements for the assumption
  • The property must be used by the seller as their primary residence
  • Buyers must verify the FHA loan is assumable & apply as they would for an individual FHA loan
  • Seller's lender will verify the buyer meets the qualifications, including creditworthiness.
  • FHA loans carry MIP (Mortgage Insurance Premium) for the life of the loan
  • FHA loans have a 1.75% funding fee
  • The FHA value of a lower downpayment is negated by the assumption need to make up the difference between sales price and assumable loan balance if the two are not equal


  • The Department of Veterans Affairs offers mortgages to qualified military members and spouses of military members, but  assumption buyers don't need to be a member of the military to qualify.

  • VA sellers will lose their entitlement in most cases if the buyer is non-military, so these sales are rare
  • The lender and the regional VA loan office will need to approve the buyer for the loan assumption

  • For loans initiated before March 1, 1988, buyers don't need VA approval to assume the mortgage

Thumbs up on that

Assumable Mortgage Advantages

  • A buyer can adopt financing with a lower interest rate than the current market rate for the balance of the existing loan
  • It allows the seller to realize a better price on the property as the buyer benefits from the assumed mortgage loan
  • The Buyer saves on financing fees
Thumbs down on that

Assumable Mortgage Disadvantages

  • Buyers may need substantial down payments when the equity is high
  • Lenders may not cooperate when a second mortgage is needed
  • With two mortgages, the risk of default increases
  • Unless released, the seller can be held liable in the event of default by the buyer (private assumption)
  • FHA terms may cancel out the advantage of an assumable loan.

Do I Still Need An Agent?

Of course, we can be considered biased here, but yes! This is still a home sale and purchase, and all the associated practices still apply, and because an assumption sale and purchase can be more complex than the average transaction, there is even more reason to have a real estate professional on your side.

There ARE assumable mortgage properties in and around DC. We create this Collection searching listings with the term “affordable” in the public description. Just scroll down within the listing box to view all.

  • As always, we encourage you to talk to a reputable mortgage lender regarding this topic. Our information is taken from the following sources and provided for informational purposes only.