{"id":4731,"date":"2024-03-01T13:10:30","date_gmt":"2024-03-01T13:10:30","guid":{"rendered":"http:\/\/billingsrealtybrokers.paradiseinnovations.com\/index.php\/2024\/03\/01\/we-bought-our-home-with-a-2-6-assumable-mortgage-why-it-was-hard-to-get-but-worth-the-fight\/"},"modified":"2024-03-01T13:10:30","modified_gmt":"2024-03-01T13:10:30","slug":"we-bought-our-home-with-a-2-6-assumable-mortgage-why-it-was-hard-to-get-but-worth-the-fight","status":"publish","type":"post","link":"http:\/\/billingsrealtybrokers.paradiseinnovations.com\/index.php\/2024\/03\/01\/we-bought-our-home-with-a-2-6-assumable-mortgage-why-it-was-hard-to-get-but-worth-the-fight\/","title":{"rendered":"\u2018We Bought Our Home With a 2.6% Assumable Mortgage\u2019\u2014Why It Was Hard To Get, but Worth the Fight"},"content":{"rendered":"

<\/a><\/p>\n

Grace Lucchese \/ Realtor.com<\/p>\n

<\/p>\n

Mickey Ricard <\/strong>and Grace Lucchese <\/strong>were excited to buy their first home together. But these 24-year-olds knew they faced a tough market, with many listings around the Boston area nearly double what they could afford\u2014and interest rates hovering in the mid-7% range.<\/p>\n

\u201cWe\u2019d seen some dumps,\u201d Lucchese admits. \u201cWe were discouraged. Then my mom was on Realtor.com\u00ae<\/a> and saw this house and was like, \u2018You have to go see it.’\u201d<\/p>\n

The three-bedroom Colonial in Westford, MA,<\/a> was listed for $429,000. While the 1885 build was a little run-down and in need of repairs, Ricard and Lucchese were delighted to see that the property had not just one but two living rooms and a fenced yard for their mutt Moon. It was also within walking distance of Freedom Park and the beach at Forge Pond.<\/p>\n

This listing\u2019s greatest selling point was its assumable mortgage.<\/p>\n

Realtor.com<\/p>\n

\u201cWe came, fell in love, and put in an offer literally walking out the door,\u201d says Lucchese.<\/p>\n

But the real selling point of this property emerged during the negotiations that followed.<\/p>\n

\u201cWe were trying to talk the seller down on the price when he brought up the fact that we could assume his loan,\u201d says Ricard. \u201cAt first, we didn\u2019t know what that was.\u201d<\/p>\n

Ricard and Lucchese learned that an assumable mortgage<\/a> would allow them to essentially \u201ctake over\u201d the seller\u2019s mortgage\u2014as well as its 2.6% interest rate.<\/p>\n

Rates at that time hovered at 7.6%, so \u201cour mortgage payment would go from $3,800 to $1,700 per month,\u201d Lucchese recalls. \u201cIt was the deal of the century, a loophole, like winning the lottery.\u201d<\/p>\n

After hearing this, these young homebuyers were all for moving ahead. Getting their lender on board, however, was another story.<\/p>\n

Mickey Ricard and Grace Lucchese were able to buy a house together at age 24 by using an assumable loan.<\/p>\n

Grace Lucchese<\/p>\n

Why assumable loans are in demand\u2014but not easy to obtain<\/h2>\n

While assumable mortgages have been around for decades, few have heard of them because the right conditions to make them a once-in-a-generation windfall have never really clicked into place until now.<\/p>\n

\u201cWith the dramatic spike in rates, there is an opportunity there,\u201d says Jerry Devlin<\/strong>\u00a0of Assume Loans<\/a>, a company in Brookline, MA, that he co-founded in September to help this type of borrower navigate this relatively unknown transaction.<\/p>\n

Granted, not all loans are assumable, and conventional loans typically won\u2019t qualify. The main types of assumable loans include FHA<\/a>, VA<\/a>, and USDA<\/a> loans. And they constitute a sizable chunk of today\u2019s housing inventory.<\/p>\n

Realtor.com data suggests that about 6% of homes for sale across the U.S. are eligible for assumption. A small percentage of listings (0.4% nationally) advertise their loan\u2019s assumability as a perk, with the highest share seen in Honolulu<\/a> (3.3%); New Orleans<\/a> (2.8%); Ogden<\/a>\u2013Clearfield, UT<\/a> (1.6%); Tucson, AZ<\/a> (1.4%); and Augusta<\/a>, GA<\/a> (1.3%).<\/p>\n

The cities with the highest share of listings mentioning assumable loans as a sales perk.<\/p>\n

Realtor.com<\/p>\n

\u201cMany of the areas with a high share of listings mentioning an assumable mortgage are home to or near a military base, and therefore see a larger share of VA loans, which are assumable,\u201d says Realtor.com economic research analyst Hannah Jones<\/strong> of her research.<\/p>\n

Given that about 29% of homeowners have loans with rates below 3%<\/a>, assumable loans offer the potential to save homebuyers hundreds or even thousands of dollars per month. Sellers can also benefit and fetch a higher sales price on their home.<\/p>\n

Yet despite this win-win scenario, assumable loans are still so rare, they\u2019ve developed a reputation as being the \u201cunicorn of all homebuying transactions<\/a>.\u201d<\/p>\n

Why? Some say it\u2019s because there\u2019s not much in it for lenders.<\/p>\n

Ricard and Lucchese got this impression after approaching the seller\u2019s bank, PennyMac, saying they\u2019d like to assume the seller\u2019s loan.<\/p>\n

\u201cTheir response was, \u2018You\u2019re not buying this house unless you\u2019re buying it with a regular loan,’\u201d Ricard recalls. \u201cThey just didn\u2019t want to do the assumption because they don\u2019t make money.\u201d<\/p>\n

When the couple insisted on moving forward with the assumable loan, they were informed that these mortgages were handled by a \u201cspecial service group\u201d reachable only by fax.<\/p>\n

Whenever they tried calling to check in, no one responded, Ricard recalls. \u201cThey kept on basically pushing us off to everybody else in the company.\u201d<\/p>\n

Luckily, they had decided to hire some muscle to help push this loan through: Mark McDonough<\/strong>, a principal at Assume Loans, who says that the runaround his clients experienced is sadly the norm with many lenders.<\/p>\n

\u201cThere\u2019s a shadow world of accounting that makes sense to jerk people around on assumptions,\u201d he says. \u201cMost are structured the same way\u2014with a hidden assumptions loan group, reachable by fax, nobody calls back, no way to follow up.\u201d<\/p>\n

Yet based on his decades of experience in the loan industry, McDonough adds, \u201cWe know when someone is putting up an artificial wall. And it\u2019s almost fun getting around it. It\u2019s like solving a puzzle. We know where all the bodies are buried, when a lender is violating regulations.\u201d<\/p>\n

McDonough knew exactly how to get PennyMac moving: Bypass the \u201cspecial service\u201d fax line and submit to one of PennyMac\u2019s licensed loan officers six key pieces of information known as ALIENS, an acronym of the following:<\/p>\n

Address of the property
\nLoan amount requested
\nIncome of applicant
\nEstimated value of mortgage loan application
\nNames of borrowers
\nSocial Security numbers<\/p>\n

By law, once ALIENS has been received, the clock starts ticking: A lender has 30 days to render a credit decision on the applicant and 45 days to close.<\/p>\n

But even then, McDonough and his clients were met with resistance.<\/p>\n

\u201cThe loan officer said, \u2018I don\u2019t know what to do with an assumable loan,’\u201d McDonough recalls. \u201cI said, \u2018That\u2019s not my problem. You don\u2019t have that right.\u2019 I also sent complaints to everyone in their C-suite. \u2026 That ends up getting attention and gets things done.\u201d<\/p>\n

Ricard and Lucchese say they never could have navigated the assumable home loan process without help.<\/p>\n

Grace Lucchese <\/p>\n

Assumable loans: Good for buyers, bad for lenders?<\/h2>\n

So why, exactly, do lenders drag their feet on assumable loans\u2014is it really all about the money?<\/p>\n

The math certainly seems to support this suspicion. Conventional loans come with hefty closing costs<\/a> ranging from 2% to 7% of a home\u2019s purchase price.\u00a0On an assumable loan, however, fees are capped at a mere $300 for VA loans and $900 for FHA.<\/p>\n

In 2022, the Mortgage Bankers Association issued a request to the Federal Housing Administration<\/a> to increase the allowable fees on both VA and FHA loan assumptions to $3,500. But this request was not granted.<\/p>\n

Devlin also concedes that many lenders might be slow on assumable loans since they aren\u2019t used to dealing with them, and also lack the resources to give them the attention they require.<\/p>\n

Steve Bailey<\/strong>, senior managing director and chief servicing officer at PennyMac, agrees.<\/p>\n

\u201cAssumptions typically involve additional complexities,\u201d Bailey explains. \u201cOverall understanding and knowledge of assumptions is not as widespread as conventional loans.\u201d<\/p>\n

Additionally, because conventional loans are more common, the process leverages more advanced technologies. However, handling assumptions often requires a more hands-on approach like manual underwriting, mostly because there are no automated underwriting systems available to support them.<\/p>\n

Still, whatever the reasons slowing down assumable loans, McDonough thinks they\u2019re no excuse.<\/p>\n

\u201cIt\u2019s not right that assumable options\u2014which are part of the National Housing Act, which created the FHA in 1934\u2014should in any way be made difficult [for] buyers,\u201d he says.<\/p>\n

As for what needs to change, raising allowable fees for assumable loans above $300 could help. Pressure from on high could also make a difference.<\/p>\n

\u201cThe VA came out with a circular<\/a> two months ago telling all VA lenders and servicers to smarten up and start not obstructing these assumptions,\u201d McDonough says. \u201cThe FHA has to do the same thing. I think these servicers need to put a little bit of their best and brightest on getting these done.\u201d<\/p>\n

Bailey adds that PennyMac has \u201cmore than doubled the dedicated assumption resources to meet higher demand. This resulted in growing our completed assumptions more than six times year over year from 2022 to 2023. We will continue to increase our resources to support the rising popularity.\u201d<\/p>\n

But until all corners of the lending world embrace helping assumable loan borrowers, McDonough says jokingly, \u201cIt will allow Jerry and me to have a lucrative venture for a while.\u201d<\/p>\n

Assume Loans\u2019 fees start at $2,950 but can go higher depending on how involved it needs to be in the assumption process, says Devlin.<\/p>\n

While Ricard and Lucchese were initially not sure they could afford the extra cost, in the end, Ricards says it was totally worth it.<\/p>\n

\u201cWe would not have gotten this house without Mark,\u201d he says.<\/p>\n

Ricard, Grace, and their dog Moon love their large front porch.<\/p>\n

Photo courtesy of Grace Lucchese<\/p>\n

\u2018You have to fight for it, but it\u2019s so worth it\u2019<\/h2>\n

With McDonough\u2019s help, Ricard and Lucchese succeeded in assuming their seller\u2019s loan and closed on their home on Jan. 16 for $422,500. Their house and their loan are the envy of all who hear their story.<\/p>\n

\u201cWhenever we tell people how much our assumable loan saves us, their faces fall, and they\u2019re like, \u2018I need to find this,’\u201d Lucchese says.<\/p>\n

Since their home was so affordable, Ricard and Lucchese were able to renovate soon after moving in.<\/p>\n

Grace Lucchese <\/p>\n

Their advice to others?<\/p>\n

\u201cI would absolutely recommend assumable loans, but I think people need to be wary of who they\u2019re working with,\u201d Ricard says.<\/p>\n

\u201cWe have a saying that \u2018nothing is ever easy for us,’\u201d Lucchese says. \u201cSo be ready to fight for it. It\u2019s such a shame it\u2019s so hard to buy a house. But now there\u2019s a loophole\u2014and if you find it, you\u2019ve just got to take a risk and do it.\u201d<\/p>\n

These homebuyers hope their story can help others navigate the assumable home loan process.<\/p>\n

Grace Lucchese <\/p>\n

Realtor.com<\/a> has recently added an \u201cassumable loan\u201d search filter so shoppers can easily find these properties. Below is a list of cities with the highest percentage of listings that mention \u201cassumable loan.\u201d\u00a0<\/em><\/p>\n

Honolulu, HI<\/a><\/h2>\n

Percentage of listings: 3.3%<\/strong>
\n2857 Von Hamm Pl<\/a><\/strong>
\nPrice: $1,589,000<\/strong><\/p>\n

Honolulu, HI<\/p>\n

Realtor.com<\/p>\n

New Orleans, LA<\/a><\/h2>\n

Percentage of listings: 2.8%<\/strong>
\n3174 Potomac St<\/a><\/strong>
\nPrice:$169,500<\/strong><\/p>\n

New Orleans, LA<\/p>\n

Realtor.com<\/p>\n

Ogden, UT<\/a><\/h2>\n

Percentage of listings: 1.6%<\/strong>
\n3151 N Holiday Dr<\/a><\/strong>
\nPrice: $489,000<\/strong><\/p>\n

Ogden, UT<\/p>\n

Realtor.com<\/p>\n

Tucson, AZ<\/a><\/h2>\n

Percentage of listings: 1.4%<\/strong>
\n9628 E Paseo Del Tornasol<\/a><\/strong>
\nPrice: $305,000<\/strong><\/p>\n

Tucson, AZ<\/p>\n

Realtor.com<\/p>\n

Augusta<\/a>, GA<\/a><\/h2>\n

Percentage of listings: 1.3%<\/strong>
\n3804 Retreat Ct<\/a><\/strong>
\nPrice: $225,000<\/strong><\/p>\n

Augusta, GA<\/p>\n

Realtor.com<\/p>\n

San Antonio, TX<\/a><\/h2>\n

Percentage of listings: 1.21%<\/strong>
\n237 Vance St<\/a><\/strong>
\nPrice: $989,000<\/strong><\/p>\n

San Antonio, TX<\/p>\n

Realtor.com<\/p>\n

Virginia Beach, VA<\/a><\/h2>\n

Percentage of listings: 1.16%<\/strong>
\n4173 Charity Neck Rd<\/a><\/strong>
\nPrice: $970,000<\/strong><\/p>\n

Virginia Beach, VA<\/p>\n

Realtor.com<\/p>\n

Salt Lake City, UT<\/a><\/h2>\n

Percentage of listings: 1.08%<\/strong>
\n5311 S Clover Meadow Dr W<\/a><\/strong>
\nPrice: $565,900<\/strong><\/p>\n

Salt Lake City, UT<\/p>\n

Realtor.com<\/p>\n

Jacksonville, FL<\/a><\/h2>\n

Percentage of listings: 1%<\/strong>
\n3483 Wentworth Cir W<\/a><\/strong>
\nPrice: $375,000<\/strong><\/p>\n

Jacksonville, FL<\/p>\n

Realtor.com<\/p>\n

Tampa, FL<\/a><\/h2>\n

Percentage of listings: 0.97%<\/strong>
\n4607 Limerick Dr<\/a><\/strong>
\nPrice: $245,000<\/strong><\/p>\n

Tampa, FL<\/p>\n

Realtor.com<\/p>\n

The post \u2018We Bought Our Home With a 2.6% Assumable Mortgage\u2019\u2014Why It Was Hard To Get, but Worth the Fight<\/a> appeared first on Real Estate News & Insights | realtor.com\u00ae<\/a>.<\/p>","protected":false},"excerpt":{"rendered":"

Grace Lucchese \/ Realtor.com Mickey Ricard and Grace Lucchese were excited to buy their first home together. But these 24-year-olds knew they faced a tough market, with many listings around the Boston area nearly double what they could afford\u2014and interest rates hovering in the mid-7% range. \u201cWe\u2019d seen some dumps,\u201d Lucchese admits. \u201cWe were discouraged….Read More→<\/a><\/p>\n","protected":false},"author":0,"featured_media":4732,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-4731","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uncategorized"],"_links":{"self":[{"href":"http:\/\/billingsrealtybrokers.paradiseinnovations.com\/index.php\/wp-json\/wp\/v2\/posts\/4731","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/billingsrealtybrokers.paradiseinnovations.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/billingsrealtybrokers.paradiseinnovations.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"replies":[{"embeddable":true,"href":"http:\/\/billingsrealtybrokers.paradiseinnovations.com\/index.php\/wp-json\/wp\/v2\/comments?post=4731"}],"version-history":[{"count":0,"href":"http:\/\/billingsrealtybrokers.paradiseinnovations.com\/index.php\/wp-json\/wp\/v2\/posts\/4731\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"http:\/\/billingsrealtybrokers.paradiseinnovations.com\/index.php\/wp-json\/wp\/v2\/media\/4732"}],"wp:attachment":[{"href":"http:\/\/billingsrealtybrokers.paradiseinnovations.com\/index.php\/wp-json\/wp\/v2\/media?parent=4731"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/billingsrealtybrokers.paradiseinnovations.com\/index.php\/wp-json\/wp\/v2\/categories?post=4731"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/billingsrealtybrokers.paradiseinnovations.com\/index.php\/wp-json\/wp\/v2\/tags?post=4731"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}