Sellers May Use their FHA, VA Loans as Marketing Tool

Home owners who have a mortgage insured by the Department of Veterans Affairs or Federal Housing Administration are often unaware of one feature: The buyers may be able to take over the home owner’s loans under the same terms. This prevents the buyer from having to take out a new mortgage, and may be an incentive that can be used as a marketing tool to sell a home — particularly at a time when mortgage rates are on the rise, The New York Times reports.

“You could now have a seller saying, ‘I have a great house to sell you and a great mortgage to go with it, which is better than my neighbor, who only has a great house,’ ” Marc Israel, an executive vice president of Kensington Vanguard National Land Services and a real estate lawyer, told The New York Times.

The advantage to buyers is that they may be get a lower mortgage rate by assuming the seller’s loan. It also can be cheaper than applying for a new one with fewer settlement fees. An appraisal is not required, but buyers must  prove their creditworthiness.

Another potential perk to assuming the seller’s loan may be that buyers then will be further in the amortization schedule than on a new loan, which could mean more of the monthly payment would go toward the principal.

Source: “Taking Over a Seller’s Loan,” The New York Times (Sept. 19, 2013)