About half of the mortgages in America carry an interest rate of 4% or lower, according to the Federal Housing Finance Agency. Most of those loans will be paid off when the home sells, and the low rate disappears with them. But some of them can be handed to the next buyer, rate and all.
That is called an assumable mortgage. If you are buying a home in California, it can mean a payment built on a 3% rate when new loans cost far more. It also comes with real obstacles, and most of them are about cash and time.
Bill Lewis at Choice One Mortgage has spent more than 30 years helping California homebuyers find the financing that fits. In this guide, we'll cover which loans can be assumed, what an assumption can save, how to find one, and how to buy one.
Quick answer: FHA, VA, and USDA loans can usually be assumed by a qualified buyer. You take over the seller's rate, balance, and remaining term, and you pay the seller the difference between the price and the loan balance. In California that difference is often large, so an assumption works best for buyers with strong cash or a plan to finance the gap.
What Is an Assumable Mortgage?
With a normal purchase, the seller's loan is paid off at closing and you get a new loan at today's rate. With an assumption, the seller's loan stays in place and you step into it. You get:
- The seller's interest rate, for the rest of the loan.
- The remaining balance, not a new, larger loan.
- The remaining term. If the seller is five years into a 30-year loan, you have 25 years left.
The loan servicer has to approve you, and the seller should get a written release of liability so they are no longer responsible for the loan.
Which Loans Are Assumable?
| Loan Type | Assumable? | What to Know |
|---|---|---|
| FHA | Yes | The buyer must qualify with the servicer and live in the home as a primary residence. |
| VA | Yes | The buyer must qualify with the servicer. The buyer does not have to be a veteran. |
| USDA | Yes, with approval | Less common in California. Some assumptions come with a new rate and terms. |
| Conventional | Usually no | Most have a due-on-sale clause, so the loan must be paid off when the home sells. |
Most California mortgages are conventional, so most homes for sale won't qualify. The opportunity is in homes bought or refinanced with an FHA loan or a VA loan in 2020 and 2021, when rates were at their lowest.
What an Assumption Can Save
The rates and figures in this article are used for example purposes only. Actual rates change daily and depend on each borrower's situation.
Here is an example. A seller bought in 2021 with a $430,000 FHA loan at 2.875%. Five years later the balance is about $381,400, and the home is selling for $600,000.
| Deal Detail | Amount |
|---|---|
| Purchase price | $600,000 |
| Seller's FHA loan balance | $381,420 at 2.875%, 25 years left |
| Seller's principal & interest payment | $1,784.04/month |
| Gap between price and loan balance | $218,580 |
| Rate on a new 30-year loan (example) | 6.5% |
Now compare three ways to buy that home. The first two buyers each bring $60,000 (10% of the price).
| How You Buy | Cash Needed for Price | Monthly P&I |
|---|---|---|
| New loan: $540,000 at 6.5% | $60,000 | $3,413.17 |
| Assume the loan + $158,580 second mortgage at 8.5% | $60,000 | $3,003.38 |
| Assume the loan and pay the whole gap in cash | $218,580 | $1,784.04 |
With the same $60,000, the assumption plus a second mortgage saves about $410 a month, even though the second mortgage carries a higher rate. The combined rate on the two loans works out to about 4.5%. A buyer who can cover the whole gap in cash saves about $1,629 a month.
Two things to keep in mind. The assumed loan has 25 years left instead of 30, so more of each payment goes to principal. And on an FHA loan the monthly mortgage insurance stays with the loan, which in this example adds roughly $270 a month. A new loan with 10% down would have mortgage insurance of its own. You can test your own numbers with our mortgage payment calculator.
The Catch: The Gap Between the Price and the Loan
You only take over what the seller still owes. Everything above that is the seller's equity, and you have to pay it at closing. California home values have climbed since 2020 and 2021, so the gap on a loan from those years is often $150,000 to $300,000 or more.
There are two ways to cover it:
- Cash. This is the simplest and gives you the biggest savings. It works well for buyers who are moving up with equity from a home they sold.
- A second mortgage. A second loan at today's rates can cover part of the gap. The servicer of the assumed loan has to allow it, both payments count when you qualify, and not every lender offers one. Ask us early whether this fits your situation.
The smaller the gap compared with the price, the better an assumption works. A home with a large remaining balance and a low rate is the one to look for.
How to Find an Assumable Mortgage in California
No single website lists every assumable loan, so finding one takes some digging.
- Have your Realtor search the MLS. Agents can search listing remarks and financing terms for "assumable," "FHA," or "VA."
- Look at when the seller bought or refinanced. Loans from 2020 and 2021 carry the lowest rates. Public records show the date and often the loan type.
- Look near military communities. VA loans are common around San Diego County, the Inland Empire, Ventura County, and the high desert.
- Look where FHA is common. Entry-level and mid-priced neighborhoods in Riverside and San Bernardino counties, including much of the Coachella Valley, have more FHA loans.
- Ask the listing agent directly. "What kind of loan does the seller have, what is the rate, and what is the balance?" Many sellers don't know their loan is a selling point until someone asks.
- Use assumable-listing websites with care. Several sites advertise homes with assumable loans. Treat them as a starting point and confirm the loan details with the seller's servicer.
How to Buy One: Step by Step
- Confirm the loan. Ask the seller for a recent mortgage statement showing the loan type, rate, balance, and servicer. Then call the servicer and confirm it can be assumed.
- Run the numbers. Compare the assumption with a new loan, including the gap, mortgage insurance, and the shorter remaining term. We do this at no cost.
- Plan the gap. Decide how much is cash and whether a second mortgage is needed and allowed.
- Write the offer for an assumption. Your Realtor should make the offer contingent on the servicer approving the assumption, allow a longer escrow, and require a release of liability for the seller.
- Apply with the seller's servicer. You submit income, asset, and credit documents to the servicer, not to a new lender. They review you much like a new loan.
- Keep a backup. Get pre-approved for a new loan too, so the purchase can still close if the assumption is denied or runs out of time.
- Close. You sign the assumption agreement, pay the seller their equity, and take over the payments.
FHA vs. VA Assumptions
| FHA | VA | |
|---|---|---|
| Who can assume | Any buyer the servicer approves | Any buyer the servicer approves, veteran or not |
| Occupancy | Must be your primary residence | Servicer and VA rules apply; most buyers plan to live in the home |
| Fees | Servicer processing fee capped at $1,800 | 0.5% VA funding fee on the balance, plus a small processing fee capped by the VA |
| Mortgage insurance | Monthly premium stays with the loan | None |
| Timing | Often 45 to 90 days | Decision required within 45 days of a complete application; often 45 to 90 days overall |
| Seller's concern | Getting a release of liability | Release of liability, and whether their VA entitlement is restored |
The VA entitlement point matters to sellers. If a veteran lets a non-veteran assume the loan, the seller's entitlement stays tied to that home until the loan is paid off, which can limit their next VA purchase. If the buyer is an eligible veteran who substitutes their own entitlement, the seller gets theirs back. Expect a veteran seller to prefer a veteran buyer.
What Can Go Wrong
- It takes longer. Servicers handle assumptions more slowly than lenders handle new loans. A seller who needs a fast close may pass.
- The gap is too big. If you can't cover it with cash or a second mortgage, the assumption doesn't work.
- The seller wants a higher price. A low-rate loan is worth money, and some sellers price it in. Compare the total cost, not only the rate.
- The servicer says no. You still have to qualify. That is why a backup pre-approval matters.
- Property taxes still reset. In California the home is reassessed at your purchase price when it changes hands. Assuming the loan does not keep the seller's tax bill.
When an Assumption Makes Sense
- The seller has an FHA or VA loan with a rate well below today's.
- The remaining balance is a large share of the price, so the gap is manageable.
- You have the cash for the gap, or you qualify for a second mortgage.
- You and the seller can both live with a 60 to 90 day escrow.
- You plan to keep the home long enough for the monthly savings to add up.
If the gap is large and you would finance most of it at today's rates, a new loan can come out about the same with far less hassle. Sometimes a better move is to negotiate a seller concession for a temporary rate buydown instead.
The Bottom Line
An assumable mortgage lets you buy the house and the loan that comes with it. When the rate is low and the gap is manageable, the savings are hard to beat. When the gap is large, the math gets closer, and the extra time and paperwork may not be worth it.
The way to know is to run both options side by side before you write the offer. That is what we do for our clients, whether they end up assuming a loan or getting a new purchase loan.
Found a home with an assumable loan?
Call Bill Lewis at (310) 614-5920 for a free side-by-side comparison of the assumption and a new loan.
Contact Us TodayFrequently Asked Questions About Assumable Mortgages
What is an assumable mortgage?
An assumable mortgage is a home loan that a buyer can take over from the seller. The buyer keeps the seller's interest rate, remaining balance, and remaining term instead of getting a new loan at today's rate. The loan servicer has to approve the buyer first.
Which mortgages are assumable?
FHA, VA, and USDA loans are generally assumable with the servicer's approval. Most conventional loans are not, because they include a due-on-sale clause that lets the lender call the loan when the home is sold.
Do I have to be a veteran to assume a VA loan?
No. A buyer who is not a veteran can assume a VA loan if the servicer approves them. The catch is on the seller's side: unless the buyer is an eligible veteran who substitutes their own entitlement, the seller's VA entitlement stays tied to that loan until it is paid off.
How much cash do I need to assume a mortgage?
You need to cover the difference between the purchase price and the seller's loan balance, plus closing costs. In California that gap is often $150,000 or more because of how much homes have appreciated. You can pay it in cash, or in some cases with a second mortgage if the servicer allows one.
How long does a mortgage assumption take?
Plan on 45 to 90 days. The seller's loan servicer processes the assumption, and servicers are usually slower than a lender originating a new loan. VA servicers with automatic authority are required to make a decision within 45 days of receiving a complete application.
Do I have to qualify to assume a mortgage?
Yes. The servicer reviews your credit, income, and debts much like a lender would for a new loan. FHA assumptions also require that you live in the home as your primary residence.
Does FHA mortgage insurance go away when I assume the loan?
No. The FHA monthly mortgage insurance premium stays with the loan, so you keep paying it on the same terms the seller had. Include it when you compare an assumption with a new loan.
How do I find homes with assumable mortgages in California?
Ask your Realtor to search the MLS for listings that mention an assumable loan or FHA or VA financing, look at homes bought or refinanced in 2020 and 2021, and ask the listing agent what kind of loan the seller has and at what rate. Homes near military bases are more likely to have VA loans.
Can Choice One Mortgage help with an assumption?
Yes. We can compare an assumption against a new loan with real numbers, help you plan for the gap between the price and the loan balance, and line up a new loan as a backup in case the assumption falls through. Call (310) 614-5920.
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About the Author: Bill Lewis
Mortgage Loan Originator, Choice One Mortgage · NMLS #284797
Bill Lewis has spent more than 30 years helping Southern California homebuyers and the Realtors who serve them structure financing that fits their real situation. Based in La Quinta, Choice One Mortgage serves buyers throughout the Coachella Valley, Ventura County, and the South Bay. Learn more about our team or call (310) 614-5920.
All rates, payments, balances, and fees in this article are for example purposes only and are not a quote or offer of credit. Actual rates change daily and depend on credit, loan type, property, and other factors. Assumption rules and fees are set by FHA, VA, USDA, and the loan servicer, and they can change; approval of an assumption is not guaranteed. This is not a commitment to lend. All loans are subject to credit approval, underwriting guidelines, and property valuation. Equal Housing Opportunity. COMC, Inc. dba Choice One Mortgage Company. Licensed by the CA DRE #01238593. NMLS #233784.