How To Get A 3% Mortgage Loan Today

Performance Property Real Estate Question

Q: Is there any way to get a low mortgage interest loan right now? Mindy, Montclair, NJ

A: 30 year fixed annual mortgage rates right now are at about 8% which is much higher than they were in recent history. One way to get a lower mortgage rate when you buy a home now is by assuming a loan from a home seller who currently has a mortgage loan with a lower interest rate. Most home buyers don’t know about mortgage loan assumptions. When a buyer buys property and assumes a mortgage, the buyer becomes primarily liable for the debt. Although FHA is currently only processing about 3,000 mortgage loan assumptions per year, more than 20% of all active mortgages are assumable–most of these assumable mortgages are FHA or VA mortgage loans. Most government-backed loans, including all FHA loans, are generally assumable, as long as the lender approves the sale. Mortgage companies are often reluctant to participate in loan assumptions because they don’t make nearly as much money on loan assumptions as they do when they originate new mortgage loans. When a home buyer assumes a home seller’s mortgage loan, the buyer is responsible for paying the difference between the seller’s outstanding mortgage balance and the home’s purchase price; if the buyer does not have the cash to pay that difference, they would have to get a 2nd mortgage loan that would likely have a much higher interest rate than the 1st mortgage loan they are assuming. Thanks for your question, Mindy.

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