Want a 2.9% interest rate in your mortgage….. well, there is a way!
Interest rates have increased and that pushed away potential buyers from the real estate market. A year ago, you could purchase a home with a 2.9% interest rate on the money you were borrowing. However, inflation forced the mortgage rates to go up as high as 6%. This caused monthly mortgage payments to increase by several hundred of dollars.
However, that doesn’t mean you can’t purchase a house with a 2.9% interest rate. There is a way! It’s called an Assumable Loan!
Sellers who used a VA (Veterans Affairs) loan, can have the loan assumed by a buyer of their property. There are requirements, and if a buyer can meet those requirements the loans is assumed!
But it’s not easy…. The requirements can vary, and generally require the following:
1. The buyer must apply for the existing loan and be qualified by the lender.
2. The buyer must agree to all the terms of the existing loan such as the existing balance, existing interest rate and repayment agreement.
3. The buyer may also assume any other liabilities associated with the mortgage.
There are some pros and cons for both buyers and sellers with assumable loans.
The pros for buyers include the opportunity to hold on to a lower interest rates than the ones that are currently available in the market. For sellers, having trouble selling their homes, marketing your VA loans to be assumed by a potential buyer is a great incentive.
The cons for buyers is that if the seller has a sizeable amount in equity, then you have to bring that amount as a down payment. There are few banks offering a second mortgage to buyers looking to assume a loan. For sellers, the VA loan entitlement will be waived, meaning that you can’t get a VA loan for another purchase when your VA loan is assumed by another buyer.
Finally, the big issue for many homebuyers and sellers is that assumable loans are a new thing for mortgage banks. Therefore, a four-week close may not happen. You have to be flexible until the banks work out the kinks.
If you want more information on how this work, reach out to us and we can help find you a property with an assumable loan!
