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Advice on Assumable Loan

Posted: Tue Jan 24, 2023 12:36 pm
by boglemario789

I recently put an offer on a house that had an assumable mortgage (VA loan). The real estate contract included that the purchase would be contingent on assuming the loan and closing would be in 45 days. The offer was accepeted. However, the mortgage lender said it could take up to 6 months because they are backed up. Is there a reasonable solution/contract to bridge the gap for 6 months until the loan is assumed. Rental agreement etc.

Thank you,

Re: Advice on Assumable Loan

Posted: Tue Jan 24, 2023 1:12 pm
by FoolishJumper
Sure there are viable solutions, but how viable depends on various outcomes. What do you plan to do if you are unsuccessful getting approved by the lender? Will you buy the property anyway with a conventional mortgage? Will you require additional financial compensation from the seller if the assumption is unsuccessful? How much do you value (from a $ perspective) the mortgage assumption in this case? What is your reasonable assessment of the likelihood of assuming the mortgage probably factors into this calculation? VA underwriting is a little different to conventional underwriting - might be worth finding a good mortgage originator (with VA experience) and paying them to review your likelihood at getting approved. If the mortgage amount is insignficiant to your monthly cashflow and you have perfect credit, then you probably don't have as much to worry about. If you are close to the VA limits and have multiple auto loans + student loans, etc - then you are at risk of perhaps not getting approved in 6 months - what if you have an auto accident and need to get a new car loan 3 weeks before closing.

A rental lease will certainly allow you to move into the property until the approval comes through at which time you can assume the loan and close on the property. But a rental lease doesn't help you if you only want to purchase if the mortgage assumption is successful and you end up not getting approved - what do you do then: move out and go find another property to live in, how much time will you be allowed to stay as a mere renter, how much time do you want to stay as a renter. You'll want to hire an attorney to clearly write up whatever contingencies and negotiate with the seller about the various circumstances. I am a realtor and I'd never trust a realtor to prepare the proper contracts for a situation like this (and in some states they cannot since that is practicing law) - hire an attorney if you don't already have one.

Re: Advice on Assumable Loan

Posted: Tue Jan 24, 2023 3:27 pm
by boglemario789
Appreciate the advice! And good questions to consider.