Do You Need an Appraisal on an Assumption?

You'll have to fill out paperwork to assume a loan.

You'll have to fill out paperwork to assume a loan.

Assuming a mortgage can be a good way to buy a house, although it's not often done. It's simpler than going through the whole loan process and may get you a lower interest rate. It can save you some paperwork and expense of an original mortgage and could be beneficial if it's an old loan, because most mortgage interest is paid in the early years and later payments go more to the loan principal.

Qualify for the Loan

You'll have to qualify financially to assume a loan and you'll have to be approved by the lender. You'll also have to pay the seller for his equity, which can make for a huge down payment if, for instance, there's only $80,000 left on an original $120,000 loan. That means you'll need $40,000 for the seller.

FHA Loans Are Assumable

Loans insured by the Federal Housing Administration are most easily assumable. The FHA says the process is essentially a credit check to demonstrate that you have enough income to support the loan, and no appraisal is required.

There Are Costs

FHA mortgages issued after 1989 have more restrictions on assumption but these deal with financial aspects and still do not require appraisals. You will have to pay the lender some fees, to cover transfers of mortgage and other paperwork. Once the assumption is complete, you're responsible for all payments under the terms of the original mortgage and it will be in your name.

Conventional Assumptions

Loan assumptions vary on conventional loans, those not insured by the FHA. In those cases, an assumption is strictly up to the lender. Some conventional loan lenders have provisions against such transfers. A lender on a conventional loan could make a new appraisal a condition of approval.

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About the Author

Bob Haring has been a news writer and editor for more than 50 years, mostly with the Associated Press and then as executive editor of the Tulsa, Okla. "World." Since retiring he has written freelance stories and a weekly computer security column. Haring holds a Bachelor of Journalism from the University of Missouri.

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