In buying a new property or refinancing your existing home, you may be looking down the road to a time when you may want to sell.
With mortgage rates at historical lows, it would give you a definite edge if your mortgage (and its low rates) can be transferred to new owners. So if you are planning to finance or refinance a property, consider the fact that a Federal Housing Administration (FHA) mortgage is “assumable”.
“Assumability” means that a new owner can effectively take over your mortgage payments. And this could be extremely important to you if interest rates were to climb significantly over the next few years. Assumability allows you to offer potential buyers a mortgage with payments well below market rates. Of course, the buyers of your home would still have to be able to qualify for the mortgage before they could assume that debt.
In turning over your mortgage to new owners, you are protected from liability because documents that are signed at closing release you from any liability connected to your former mortgage. Should the new owners default, thanks to these documents you’re off the hook.
As good as this sounds, consider the options carefully. You should be aware that, if you qualify for a conventional mortgage, it could prove more attractive than an assumable FHA mortgage; often a conventional mortgage will have significantly reduced or no mortgage insurance, cutting your mortgage payments and possibly offsetting the benefits of an FHA loan. Ensure you discuss your individual situation with your mortgage professional.