Are you buying or selling a home in Maryland with an assumable loan? As a local Maryland real estate agent, I’ve helped several clients successfully navigate the loan assumption process, particularly with VA and FHA loans, which are the most common types of assumable mortgages.
While assuming a loan can be a smart financial move—especially in today’s higher interest rate environment—the process can be lengthy and complex. Whether you’re a buyer looking to assume a low-rate mortgage or a seller wondering how this affects your home sale, here's everything you need to know about assuming a loan in Maryland.
What Is an Assumable Loan?
An assumable loan allows a homebuyer to take over (or "assume") the seller's existing mortgage, including its interest rate and terms. This can be a major advantage if the seller locked in a lower interest rate than what’s currently available.
What Types of Loans Are Assumable?
In Maryland—and nationwide—the most commonly assumable loans are:
- VA Loans – Backed by the Department of Veterans Affairs, VA loans are available to eligible veterans and active-duty service members.
- FHA Loans – Insured by the Federal Housing Administration, FHA loans are popular with first-time buyers due to flexible credit and down payment requirements.
Why only FHA and VA loans?
Most conventional loans are not assumable, while FHA and VA loans are government-backed and specifically allow assumptions under certain conditions.
Do You Qualify to Assume a Loan?
Even though you're taking over an existing loan, you still need to qualify with the lender based on the loan type.
FHA Loan Requirements:
- Minimum credit score: 500
- Debt-to-Income (DTI) ratio: 43% or lower
- Verifiable income
VA Loan Requirements:
- No official minimum credit score, but most lenders require 620+
- DTI ratio: typically around 41%
- Veteran status is usually required
While non-veterans can technically assume a VA loan, the seller must give up their VA loan entitlement—something most veterans are unwilling to do.
Key Information to Request Before Making an Offer
Before you submit an offer to assume a loan, make sure to verify the following:
- Remaining Loan Balance
You’ll need to pay the difference between the loan balance and the home’s purchase price—either in cash or with a second loan. - Interest Rate and Monthly Payment
Confirm the existing loan terms to understand what your monthly obligation will be. - Loan Servicer and Assumption Fees
Some lenders charge an assumption fee, typically around 1% of the loan amount. You should also budget for closing costs, usually 3–5% of the purchase price.
What Does the Loan Assumption Process Look Like?
Loan assumptions take longer than traditional closings—typically around 60 days or more (compared to a standard 30-day close). Here’s how the process usually works:
Step-by-Step Process:
- Identify a property with an assumable VA or FHA loan.
- Verify loan terms with the seller or listing agent.
- Submit an offer that includes:
- Financing contingency
- Proof of funds for the down payment (difference between purchase price and loan balance)
- Pre-approval, if using secondary financing. Some sellers would also like to see a standard pre-approval for the purchase price to verify up front that the buyer can qualify for the loan type and for some reassurance that they might still be able to move forward if the assumption is denied.
- Seller contacts loan servicer to initiate the assumption process.
- Lender contacts buyer to request financial documentation and verify eligibility.
- Loan processor is assigned to complete the underwriting process.
- Final approval is issued and settlement date is confirmed.
Important Note: Many loan assumption departments operate on a "don’t call us, we’ll call you" basis. Communication can be slow, and timelines may be unpredictable—patience is key.
Is Assuming a Loan Worth It?
If you’re a buyer in Maryland, assuming a loan can be a huge financial win, especially if the seller has a low fixed interest rate. For sellers, advertising your home as having an assumable loan can be an attractive selling point—especially in a market where rates are higher than they were just a few years ago.
Final Thoughts from a Maryland Real Estate Agent
Having guided clients through multiple successful VA and FHA loan assumptions in Maryland, I can say this: while the process isn’t always quick or easy, the potential savings for buyers can be significant. For sellers, it can increase interest in their listing.
If you're considering buying or selling a home with an assumable loan in Maryland, feel free to reach out. I’d be happy to walk you through the specifics based on your unique situation.
Sarah is a licensed Realtor® based in Howard County, MD serving Maryland, Virginia, and Pennsylvania. She specializes in rural and farm properties in Maryland, Northern Virginia, and Southern Pennsylvania.
Posted by Sarah Lipkowitz on
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