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When Loan Assumptions Make Sense

Hello Hampton Roads,

According to the average 30 year fixed rate mortgage is 4.59% and rising, starting at 4.1%  in the beginning of the year.  With rising interest rates, home loan assumptions are becoming more popular with home buyers and home sellers alike.  An assumption is when a buyer legally takes over, or assumes, the seller's loan and pays it off--generally in fewer years and at a lower interest rate than what is currently available today.   The seller's loan interest rate, repayment period, and balance are transferred to the new buyer.

All VA and FHA loans are assumable, but the buyer must credit qualify with the lender so the seller (the original borrower) can be released from the liability.  Many conventional loans are not assumable.  Both credit qualification and release of liability are incredibly important:  You want to make sure that your credit score is at least at the minimum required by FHA to qualify; the higher your score, the better your …

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