Imagine this: You are in the market for a new home, but as it stands now, your plans for this home don’t seem to stretch beyond five years. You’re considering another kid, a possible job transfer, whatever the circumstances may be, this home is probably not your final residence.
I’m sure that scenario doesn’t seem to unrealistic for most of us. So what does that have to do with assumable financing options? For some of us, maybe nothing, but for some of us, maybe everything. Like all financing options, finding out what features of the loan are important to you is paramount. Interest rate, monthly payment, down payment vs cash on hand, or even an exit strategy.
The fact is, if your goals for your home are relatively short, obtaining an FHA or VA loan can have its upsides. Both FHA and VA loans are fully assumable. Simply put, some one can not only take over your property but your interest rate as well. Think of that for a second, if rates today are hovering in the mid fours, and when you want to sell your house 6 years down the road, rates are now around eight percent, you can sell your property with your original interest rate of 4.5%. That’s an amazing selling point.
Another thing to consider with assumable loans is down payment. If you purchase the house with little to no money down, as is possible with FHA and VA loans, you will generally have a less strong equity position in the home. What that means for you? The buyer to assume your loan will have a much smaller down payment.
The truth is both FHA and VA loans have a lot of advantages to them and this is simply another one to consider. However, it is important to know that the ability to assume the loan ultimately is up to the lender. So any potential buyers will have to meet the guidelines for the loan at that time. And predicting future markets is not easy. So it is always good practice to fully research the advantages and disadvantages of any loan program before committing to it. Lucky for you, that just so happens to be our gig.