Take over the seller’s low rate, finance the gap, and compare
Updated October 2026
| Loan | Assumable? | Buyer approval | Fees set by the program |
|---|---|---|---|
| VA | Yes; anyone who qualifies, veteran or not | Credit and income review by the servicer (or VA) | Funding fee of 0.5% of the balance unless exempt; processing charge capped under 38 CFR 36.4508 |
| FHA | Yes | Loans closed on or after Dec 15, 1989 need a creditworthiness review; investors cannot assume them | Servicer processing fee; existing mortgage insurance stays |
| USDA guaranteed | Yes, with USDA approval obtained by the lender | Buyer must meet USDA eligibility rules and assume the whole debt; the rate cannot go above the original | A new guarantee fee on the remaining balance |
| Conventional | Usually no (due-on-sale clause) | n/a | n/a |
You keep the loan’s rate, remaining term and payment schedule. Once the servicer approves you as creditworthy, the seller should receive a release of liability so they are no longer on the hook if you default; on FHA loans HUD’s handbook says the lender prepares that release for loans subject to the 1989 rules.
The calculator adds three monthly pieces and sets them against a single new 30-year loan for the same amount of borrowing:
With assumption = payment on the assumed balance over its remaining years + payment on the gap loan + any mortgage insurance
New loan = payment on (price − cash down) at today’s rate over 360 months
Default case: a $450,000 price, $280,000 assumed at 3.25% over the 300 months left ($1,364.49), and $50,000 of cash. The gap is $450,000 − $280,000 − $50,000 = $120,000, financed over 20 years at 8.5% ($1,041.39). Together, $2,405.87 a month. A new $400,000 loan at 7.40% is $2,769.52, so the assumption is $363.65 cheaper every month. Over the full life of both setups, interest comes to about $259,279 on the assumption plus second against $597,027 on the new loan.
| Scenario | Gap financed | Monthly with assumption | New loan at the stated rate | Difference | Cash to close before other costs |
|---|---|---|---|---|---|
| Default: VA loan, $50,000 down, 8.5% second | $120,000 | $2,405.87 | $2,769.52 | Assumption saves $363.65 | $51,700 |
| Same, FHA loan with $150 a month of mortgage insurance | $120,000 | $2,555.87 | $2,769.52 | Assumption saves $213.65 | $50,000 |
| Buyer brings $170,000: no second loan needed | $0 | $1,364.49 | $1,938.66 | Assumption saves $574.18 | $171,700 |
| New-loan rate falls to 6.00% | $120,000 | $2,405.87 | $2,398.20 | New loan saves $7.67 | $51,700 |
| $430,000 home, $320,000 at 2.75% with 26 years left, $80,000 down | $30,000 | $1,697.11 | $2,423.33 | Assumption saves $726.22 | $81,900 |
The deciding numbers are the size of the gap and its rate. A small gap on a very low rate saves hundreds a month; a large gap on an expensive second loan can erase the advantage, and once new-loan rates fall to around 6% in this example the assumption no longer pays.
A VA loan can be assumed by a buyer who is not a veteran, but the seller’s VA entitlement stays tied to the loan until it is paid off, unless the buyer is an eligible veteran who substitutes their own entitlement. That matters to a seller who wants another VA loan soon. The assumer pays the 0.5% funding fee unless exempt and, under VA’s 2024 circulars on assumption fees, only charges VA lists (processing fee, credit report, recording, title and similar costs).
Payments here are principal and interest (plus any mortgage insurance you enter). Property tax, insurance, closing costs beyond the VA fees, and whether a lender will make a second mortgage behind a government loan are not modeled, and neither is the seller’s asking premium for an assumable loan. Whether you qualify is the servicer’s decision. A real estate attorney or HUD-approved housing counselor can review the assumption agreement and release-of-liability paperwork.