A Hidden Benefit of FHA Loans

No one can predict where interest rates will be in the future. If rates shoot up sharply, homeowners who purchased or refinanced during this time of historic lows with a FHA mortgage may have an advantage when they go to sell. Imagine you are selling your home that has an assumable mortgage with a 4.5 percent interest rate and the comparable properties require a new mortgage with current rates of 6.5 percent.

FHA loans are assumable by QUALIFYING owner occupants. This means that a potential buyer would approach the existing mortgage holder and be approved to take over the mortgage. The original borrower would be released from liability and would be allowed to get another FHA mortgage. While VA loans may also be assumable by a qualified party, the original note holder’s VA eligibility is tied up and they may not get another VA loan until the original one is paid off. This is why I counsel VA mortgage holders to be very, very careful about letting someone assume their mortgage.

I have recently heard people being told they could assume mortgages without notifying the existing lender. The logic is that mortgage companies are happy to get a payment and will not call the mortgage. I vehemently disagree with this and feel it is extremely bad advice. My recommendation is always play by the rules.

Chip Allen

Crestline Mortgage Bankers

A Division of Universal Lending Corp

Direct: 303.947.2109

Fax: 303.987.0676

Loanchip@hotmail.com

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