What is an assumable mortgage?

An assumable mortgage allows a buyer to take over the seller's existing loan, including its interest rate, remaining balance, and terms. This is especially valuable when the seller has a low-rate mortgage and current market rates are higher — the buyer can assume the loan and avoid the higher current rates. FHA, VA, and USDA loans are assumable with lender approval; most conventional loans are not. The buyer must qualify for the loan under the lender's current standards. If the home's purchase price exceeds the loan balance, the buyer must make up the difference with cash or a second mortgage.