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Real Estate Information • December 4, 2025

The Agent’s Guide to Assumable Loans

by Jason Shelby
Today, I want to tackle a topic that is often overlooked or misunderstood in our industry: Assumable Loans. With mortgage rates hovering in the 6% to 7% range for over three years, housing affordability has become a significant challenge. However, considering that 82% of homeowners nationwide currently hold a rate under 5%, there is a massive opportunity for sellers to use these lower rates to their advantage. This week, we will break down exactly how assumable loans work, the benefits they offer, and what the process looks like. Let’s dive in…
What Exactly is an Assumable Loan?
An assumable mortgage allows a buyer to take over the seller’s current mortgage terms, including the existing balance, repayment schedule, and most importantly, the interest rate. Instead of obtaining a brand new mortgage at today’s market rate 6.25%, the buyer assumes the seller’s current rate and continues paying the existing loan, which in most cases can be well below 5%.
Which loans are assumable? Generally, conventional loans are not assumable because they contain a “Due on Sale” clause. Conventional loans must be satisfied by the seller before or during the home selling process. There are very few cases where a conventional loan is assumable. However, government-backed loans usually are:
  • FHA Loans: Almost always assumable.
  • VA Loans: Assumable (Potential entitlement issues I cover below).
  • USDA Loans: Generally assumable.
The Massive Benefits
  1. For the Buyer (Purchasing Power) The math makes this a very enticing opportunity. On a $400,000 loan, the difference between a 6.5% rate and a 3.5% assumed rate is roughly $732/month in principal and interest alone. This allows buyers to qualify for homes they otherwise couldn’t afford.
  2. For the Seller (Marketability) In a shifting market, a 3.5% interest rate is a huge asset. A seller offering an assumable loan can often command a higher listing price because the monthly payment for the buyer is still lower than a comparable home with a new mortgage.
The Big Challenge: “The Equity Gap”
This is the most misunderstood part of the process and sometimes makes it not attainable for some buyers. An assumption only covers the remaining balance of the loan. It does not cover the seller’s equity.
Example:
  • Sale Price: $250,000
  • Existing Loan Balance: $200,000
  • The Gap: $50,000
The buyer cannot just assume the loan, they must cover the $50,000 gap. This can be paid via:
  1. Cash: The buyer brings the difference to closing.
  2. Second Mortgage: The buyer takes out a second loan for the gap. Finding a lender that will do a second lien behind an assumption is not impossible but can be difficult.
The Process: How it Works
It’s important to understand what the buyer and seller must do to make this happen. When I have discussed assumptions with agents in the past this is the confusing part for many. Below is a step-by-step layout of the process:
  • Step 1: Confirm Eligibility: The seller must verify with their current servicer that the loan is assumable and check if there are any specific restrictions.
  • Step 2: Apply with the Current Servicer: Unlike a normal purchase where the buyer picks their lender, the buyer must qualify with the seller’s current loan servicer. The servicer holds the keys to making this happen.
  • Step 3: Full Underwriting: The buyer must go through a full credit and income approval process to prove they can afford the payments. Once the buyer is approved, the servicer must release the seller from liability.
  • Step 4: The Timeline: Loan servicers generally are not fast during the assumption process. Be prepared for the process to take 45-60 days instead of the standard 30-day expectation. Depending on the loan servicer, the process can sometimes take longer than 60 days.
Caveat on VA Loans
If you have a military client, this is a very important piece to pay close attention to. Most everyone thinks that VA loans are only assumable between veterans, but that is not the case. Non-Veterans can assume a VA loan from a Veteran seller, but the Veteran needs to be aware that it will impact their entitlement.
  • VA to VA: If a Veteran sells to another Veteran, the buyer can substitute their entitlement. The seller gets their full entitlement back.
  • VA to Non-Veteran: A non-veteran can assume a VA loan, but the seller’s entitlement will remain “tied up” in that home until the loan is paid off. Most sellers will not want to do this as it could prevent them from using a VA loan for their next purchase.
In Conclusion
Assumable loans are not always a magic solution on a lot of deals, specifically due to the “Cash Gap” requirement. However, understanding this process can be a huge advantage for you versus other agents in your market. For a buyer with significant cash on hand, or a seller with a lower equity position, this strategy can be the difference between a stalled listing and a closed deal. Realtor.com just released their 2026 forecast, predicting that mortgage rates will average 6.3% throughout next year. If that holds true, the ability to offer a sub-3% interest rate through an assumption becomes an even more valuable tool.
Even if you don’t have a current deal for this, use it for marketing. A social media post asking, “Did you know you can still get a 3% mortgage rate in 2026?” is a fantastic conversation starter to get buyers messaging you. I hope you found this week’s newsletter helpful and have a great rest of the week!
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