Purchasing a Home on an Assumable Loan in Washington or Oregon

In the picturesque states of Washington and Oregon, the real estate market has its own set of rules and opportunities. Among them, assumable loans stand out as a financially savvy option for homebuyers in the current high interest rate market that has occurred abruptly after years of low rates. An assumable mortgage allows a buyer to take over the seller's loan under the current terms, potentially saving on interest rates and closing costs.

Understanding Assumable Loans

Assumable loans are a type of financing that, subject to lender approval, can be transferred from a seller to a buyer. This means the buyer takes on the mortgage with its existing rate, remaining balance, and repayment period. In the current economic climate, where interest rates are on the rise, an assumable loan can be particularly attractive as it may offer a rate lower than those currently available on new loans.

One major thing that buyers must be aware of is the variable between the existing loan and sales price usually needs to be paid in cash. There are many lenders that have mistakenly thought they could offer a 2nd lien to cover the variables only to learn at the last minute that they could not.

The Benefits of Assumable Loans for Homebuyers

The most significant benefit for buyers in Washington and Oregon is the potential for cost savings. With an assumable loan, buyers can avoid the fees typically associated with originating a new mortgage. Additionally, if the original loan's interest rate is lower than the current market rate, there are substantial savings over the life of the loan.

Eligibility and Process

To be eligible, buyers must meet the lender's credit and income requirements which a recent discussion with Lakeview that services the Washington State Bond and the Washington State Finance Housing Commission loans was 620 credit score and a 40% front end DTI with a 50% max back end DTI. Not all loans are assumable; generally, only FHA, VA, and USDA loans can be transferred. The process begins with a buyer agreeing to assume the loan, followed by a credit review and underwriting by the lender. This can take 60-75 days and the more the seller/buyer can be prepared and familiar with process the better the outcome will be. If approved, the transaction proceeds similarly to a standard home purchase once finalized.

If you are interested in selling or buying a home with an existing FHA, VA or USDA loan reach out to Team Black that has experience in this process and can assist with answering any questions.

You can reach Kelyn Black at 503-707-7011 and or Bill Black 360-910-3290 kelyn@sellingkeys.com bill@billcblack.com

Navigating the Legalities in Washington and Oregon

Each state has specific regulations governing assumable loans. In Washington, for instance, the Washington Administrative Code (WAC) outlines the procedures for loan assumption. Oregon has similar guidelines in place, overseen by the Oregon Division of Financial Regulation. Buyers and sellers are advised to consult with a licensed Real Estate Professional or Licensed Lender or Real Estate Attorney knowledgeable to navigate these legalities effectively.

The Role of Real Estate and Mortgage Professionals

Real estate agents and Mortgage brokers in Washington and Oregon can be well-versed in the nuances of assumable loans. They play a pivotal role in connecting sellers with potential buyers who are interested in this type of transaction. Moreover, they can provide invaluable advice on the local market and help facilitate the complex process. One thing to realize is that Mortgage Professionals are not typically compensated for an assumable and some feel this is a deterrent to these being a success. These types of loans are limited to $900 in total lender fees which is what the existing servicer collects from buyer and will be responsible to manage the Assumable loan.

Considerations for Sellers

For sellers, an assumable loan can be a unique selling point, especially in a competitive market. It can attract buyers who are looking for financial advantages or those who might not qualify for a low-interest rate due to the rising rates. However, it's crucial for sellers to ensure that the assuming buyer is creditworthy, as the original borrower can remain liable if the new borrower defaults on the loan. Having a prescreened buyer is very important.

Closing the Deal

Closing on a home with an assumable loan requires careful coordination. All parties should work with a title company that has experience with such transactions to ensure that all documents are correctly handled and the transfer of liability is properly recorded.

The Future of Assumable Loans in Washington and Oregon

As the housing market evolves, assumable loans are becoming an increasingly popular option. They offer a win-win scenario for buyers and sellers, allowing for smoother transactions and potential savings. Staying informed about market trends and the state-specific regulations will be key for anyone considering an assumable loan. There is talks about increasing the fees that may allow more participation as well as allowing Fannie Mae and Freddie Mac to allow these in the future. Reach out at anytime if you are interested in learning more at or

Kelyn@sellingkeys.com | bill@billcblack.com

Conclusion

Assumable loans provide a unique opportunity for homebuyers in Washington and Oregon to potentially save money and streamline the purchasing process. While not without their complexities, with the right guidance and understanding, they can be an excellent option for both buyers and sellers in today's market.

So, here’s a scenario we are working on this week:

The Savvy Move: How an Assumable Loan Created a Win-Win for Both Buyer and Seller

Once upon a time in a charming neighborhood, there lived a homeowner with a beautiful, classic 1920s three-story home. Nestled against a serene greenbelt, the house had character, but after 18 years, the owner longed for modern comforts: a walk-in closet, a garage, and the simplicity of a smaller home. However, she faced a dilemma: her beloved home, valued at $500,000 with a remaining mortgage of $275,000 at a desirable 3.25% interest rate, and a $1650 PITI didn't align with her financial goals. Selling meant grappling with high closing costs and the risk of a larger monthly payment for a new home.

Then, a twist of fate!

She met with “Team Black” and together they formulated a strategy to find the perfect match: a modern, three-year-old house complete with solar panels, a spacious walk-in closet, and the much-desired garage. Listed for $525,000, it boasted an attractive feature- an assumable mortgage at an enticing 2.875% rate, with a balance of $350,000.

Here's where the magic of the assumable loan came into play. By taking over the existing loan, the buyer could bypass the higher current market rates of 7.25%, avoiding the hefty upfront mortgage insurance premium of 1.75% and lender and appraisal fees. She could even inherit the seller's escrow account, further streamlining the process.

The numbers spoke volumes. The total payment for the new home, including all expenses, was a comfortable $2105- well within her $2500 ceiling. Not only did this move save her from a higher monthly outlay of over $3100, but it also left her with an extra $25,000 in hand that wasn’t required to get payment down and a reduced loan term of 27 years. No more creative 2-1 buydowns and waiting for uncertain rate drops or market shifts to refinance!

For the seller, this was a golden ticket. The attractive mortgage terms made their home stand out in the competitive market, likely fetching a price that might have been elusive otherwise.

In the end, the assumable loan was a knight in shining armor. It transformed what seemed like an impasse into a harmonious solution, illustrating the power of creative financing. The buyer secured her dream home without stretching her budget, and the seller smoothly transitioned to their next chapter. Truly, a win-win forged by the savvy Real Estate team implementing the use of an assumable loan.