Assumable Mortgages | DC Sellers

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

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.

About Assumable Mortgages

You'll want to start by reading your loan contract and contacting your mortgage lender to determine if the terms of your mortgage allow assumption. If so, to outline the terms, costs and process.

Wiat, what?

Wait--If I took out a mortgage when rates were substantially below the current market rate,  I could offer my buyer that lower rate and the terms of my existing mortgage?

That's right! For the balance of your existing mortgage, if it is assumable.

OKAY, How Does The Assumable Mortgage Work?

  • 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.
  • Assumable loans are desirable when interest rates rise, but remember, buyers can only assume the balance of the loan. The longer the seller has had it, the lower that balance will be, and buyers will have to make up the difference in cash or take out a second mortgage at prevailing market rates to cover the difference.
  • The list price of your home in DC is probably going to be higher than your remaining mortgage balance. How much depends on how long you've owned the home, the terms of your existing mortgage loan, and the current market value of the property.
  • Step 1 for sellers is to determine if the loan is assumable and the current assumable balance amount. Then run the numbers on transaction costs to determine if the equation would make your home more desirable to buyers with an assumable loan offer
  • Should you decide to offer an assumable loan on the sale of your home, you'll want to obtain formal permission from your current mortgage lender. Most mortgages include a “due on sale” clause, making the full balance of the loan due when the home is sold. A seller who wishes to offer their home for sale with the provision of an assumable mortgage first must secure permission from the lender so the 'due on sale' clause isn't triggered. You want the lender's participation in transferring the mortgage (novation) because the buyer’s assumption in itself does not release the seller from responsibility for loan payments after the transaction closes. The lender must release the seller from liability in writing at the time of closing for the seller to be free of responsibility.
  • Once you have interest from a buyer, the buyer applies to your lender to assume the mortgage, just as they would make loan application on any mortgage loan, except that they'll be qualifying for the exact terms of your loan, and potentially a second mortgage at a higher interest rate. The buyer must meet the lender's standards of creditworthiness, income, debt-to-income ratio (DTI), etc.
  • 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 the difference between the loan assumed and the purchase price, if any. The lender releases the seller from further loan responsibility with the novation transfer.
Wow who knew?

But Is Every Mortgage Assumable?

Great question! No. Only certain types of mortgages are assumable. Read on!

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 have at the top of their list. And sellers carrying assumable mortgages with advantageous terms should absolutely be having that conversation with their agents and using that perk as a top marketing item.

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.

Two types

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.
  • Unless the seller is released from the loan, they're still responsible for it and can be held jointly liable if the buyer defaults


  • 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.

  • 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 so this can make your home more marketable when rates are considered high
  • Because the buyer is getting a lower rate for the principal balance for at least a chunk of the purchase price than they’d get buying another home with a new loan, and since assumable mortgages carry lower closing costs, borrowers can apply these savings to their second mortgage and the seller may be able to realize a higher sale price
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
  • For sellers with VA loans, VA entitlement can cause a potential issue. With a VA loan, the government guarantees repayment of part of the balance if the borrower defaults. The VA limits this guarantee, which it labels "entitlement." Depending on the loan amount, some or all of the borrower's entitlement remains tied up in the home with the assumed mortgage, even after the sale, so the seller might not have enough entitlement remaining to qualify for another VA loan to buy the next home. If the VA seller sells to another VA-eligible buyer, the buyer can then substitute their own entitlement for the seller's and the VA restores the seller's full entitlement.

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.