How A Rare Type Of Mortgage Is Landing Homebuyers A 3% Mortgage Rate

Summary

Wes Van Dell shares his journey of buying a home in a challenging housing market, highlighting the advantages of assumable mortgages. With a rare 2.6% interest rate, the Van Dells managed to navigate rising costs and increased competition. Assumable mortgages allow buyers to take over the seller's existing loan terms, but their complexity and limited awareness make them less common today. As interest rates soar, interest in assumable mortgages is rising, prompting efforts by companies to simplify the process and raise awareness among both buyers and sellers.

Takeaways

• 🏡 Wes Van Dell and his wife struggled for two years to find a home due to rising interest rates.
• 📉 The couple discovered an assumable mortgage, allowing them to inherit a lower interest rate of 2.6%, compared to the market average of over 6%.
• 💰 Assumable mortgages can significantly reduce monthly payments, as seen in the Van Dells' case where they saved over $800 monthly.
• 📊 Assumable mortgages are rare but have seen a notable increase in interest, with FHA assumptions rising by 59% and VA assumptions skyrocketing by 713% since 2021.
• 🤔 Many homeowners and buyers are unaware of assumable mortgages, limiting their availability in the current market.
• 📈 The current U.S. housing market is the least affordable in 40 years, with around 60 million people priced out of homeownership.
• 🔄 Assumable mortgages allow buyers to take over the seller's loan terms, potentially offering lower interest rates than new loans.
• 📑 The process for assumable mortgages involves more paperwork and can require a larger down payment than traditional mortgages.
• 🔍 Awareness of assumable mortgages is low, with many sellers not advertising this feature, reducing potential transactions.
• 🌟 Companies like Roam and Assumable IO are working to connect buyers with assumable mortgage opportunities, potentially increasing their prevalence.

Q & A

What challenges have Wes and his wife faced in their home buying journey?

Wes and his wife have struggled to find a new home for two years, primarily due to increasing interest rates that have driven up the cost of their mortgage.

What is an assumable mortgage?

An assumable mortgage is a type of home loan where the buyer can take over the existing mortgage terms from the seller, allowing them to inherit the seller's lower interest rate.

How did the Van Dells benefit from an assumable mortgage?

The Van Dells secured an assumable mortgage with a 2.6% rate, significantly lower than the average 2024 rate of just above 6%, resulting in savings of over $800 per month.

What has caused the increased interest in assumable mortgages?

Public interest in assumable mortgages has surged in tandem with rising mortgage rates, leading to a significant increase in Google searches for the term.

What types of mortgages are typically assumable?

Assumable mortgages are mainly offered through government-backed loans, such as Federal Housing Administration (FHA), Veterans Affairs (VA), and United States Department of Agriculture (USDA) loans.

What are some complications associated with assumable mortgages?

Assumable mortgages can involve higher than expected down payments, require more paperwork, and may take longer to close compared to standard mortgages.

Why are assumable mortgages less common today?

Assumable mortgages have declined in popularity due to the passage of the Garn-St Germain Act in 1982, which allowed lenders to enforce a due on sale clause, requiring immediate repayment if a property is sold.

What percentage of homes on the market are fully assumable?

About 20-25% of homes on the market may be fully assumable, but the actual number of assumption transactions is significantly lower.

How does the appreciation of home prices affect assumable mortgages?

When a homeowner sells their property, the buyer must cover both the amount already paid towards the mortgage and any appreciation in the home's value, potentially increasing the total amount needed for the purchase.

What is being done to make assumable mortgages more accessible?

Companies like Roam, Assumable IO, and Assume List are working to streamline the process and match interested home buyers with available assumable mortgages.