When interest rates rise, home affordability shrinks. But what if there were a way to “lock in” yesterday’s low rates—even if you’re buying today?
Enter: the assumable loan.
In this guide, we’ll break down what assumable loans are, how they work, who qualifies, and why they could be a game-changer in today’s real estate market—especially in high-cost, high-rate areas like DC, Maryland, and Virginia (DMV).
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, remaining balance, and repayment term.
Example:
If the seller has a $400,000 mortgage at 2.75% with 25 years left, you could assume that loan instead of getting a new one at, say, 7%.
Why Assumable Loans Matter in 2025
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Interest Rate Savings: If rates are currently 6–7%, but you assume a loan at 2.5–3%, you could save hundreds—or thousands—per month.
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Affordability Boost: Lower payments mean you may afford a more expensive home or lower your monthly costs significantly.
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Seller Advantage: Listings with assumable loans can attract more buyers in a tight market.
Which Loans Are Assumable?
Not all loans can be assumed. Here’s a breakdown:
✅ Generally Assumable (With Lender Approval):
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FHA Loans
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VA Loans (can be assumed even by non-veterans)
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USDA Loans
❌ Generally Not Assumable:
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Conventional loans (Fannie Mae/Freddie Mac) are not assumable unless they’re pre-1980s or have rare exceptions.
Who Can Assume a Loan?
You must qualify with the existing loan servicer. The process is like applying for a new loan:
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Credit score check
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Income and employment verification
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Debt-to-income ratio review
Even if the loan is assumable, the servicer must approve you before the assumption can proceed.
How Does the Process Work?
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Identify a property with an assumable loan.
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Verify loan type (FHA, VA, USDA) and that it’s in good standing.
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Contact the loan servicer to confirm assumability and request their process.
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Submit an assumption application (usually with a fee).
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Provide financial documentation.
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Get approved by the servicer.
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Close the sale with both the real estate transfer and loan assumption happening concurrently.
What About the Difference Between Sale Price and Loan Balance?
If the home’s sale price is greater than the loan balance, the buyer must cover the difference—called the “equity gap.”
Options to cover the gap:
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Cash
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Second mortgage or HELOC
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Seller financing
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Private loans or creative options
Example:
Home is $600,000. Loan balance is $400,000 at 2.75%.
Buyer must come up with $200,000 to assume the loan.
Fees and Timeline
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Assumption Fee: ~$500–$1,000 (varies by lender)
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Closing Costs: Lower than traditional financing
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Timeline: Can take 30–90 days, depending on the servicer
Pros and Cons of Assumable Loans
✅ Pros for Buyers:
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Much lower interest rate
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Lower monthly payments
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Fewer closing costs
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Can be a workaround for tight lending markets
✅ Pros for Sellers:
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More attractive listing
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Can command a premium for the low-rate loan
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Smoother sale in a tough market
⚠️ Cons:
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Must qualify with lender
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Equity gap must be covered
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Process can be slow and paperwork-heavy
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Not every loan servicer is responsive or efficient
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Seller might remain liable unless released from the loan (especially for VA loans)
What Sellers Should Know
If you’re selling a home with an assumable loan:
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Contact your lender or servicer and ask about their assumption process.
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Advertise your low-rate mortgage in your listing description.
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Disclose your current loan balance and terms (when comfortable).
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Request a formal release of liability once the buyer is approved.
Special Note on VA Loans
VA loans are assumable by non-veterans, but:
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The seller’s entitlement stays tied to the loan unless the buyer is a qualified veteran who substitutes their own entitlement.
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This means the seller can’t use VA again until the original loan is paid off—unless they are released and entitlement is restored.
How to Find Assumable Listings
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Work with a real estate agent who understands assumable loans
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Search MLS keywords like “assumable loan” or “low-rate mortgage”
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Join Facebook groups like DMV Assumables
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Ask listing agents directly if the loan is assumable
How Real Estate Agents Can Help
An agent who understands the process can:
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Identify assumable opportunities
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Communicate with servicers
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Assist with assumption paperwork
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Help structure offers that address equity gaps
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Connect buyers with private financing if needed
Final Thoughts
Assumable loans are one of the few remaining affordability hacks in a high-rate market. They’re not always easy, but they can save buyers tens of thousands of dollars over the life of the loan.
For sellers, advertising your assumable loan might make the difference between sitting on the market and getting multiple offers.
If you’re in the DMV area, there’s a growing community of buyers, sellers, and agents who are already making use of assumable loans to their advantage. You don’t have to navigate it alone.
Want help finding or marketing an assumable loan in the DMV?
Join our Facebook group: DMV Assumables
Or reach out—I’m happy to connect you with resources or guide you through the process.