Mortgage transfers are a transaction where the lender assigns an existing mortgage from the current homeowner to a new homeowner. Homeowners who are struggling to keep up with their mortgage payments can seek a mortgage transfer, so they don’t default and go into foreclosure. However, not all mortgages are eligible for transfer.
If you’re hoping to transfer your mortgage to someone else, the lender will verify the person who will assume your mortgage has a stable source of income and a positive credit history. At a minimum, a new borrower must meet those criteria to prove they can be trusted to make a mortgage payment on time. Unfortunately, even if the new borrower meets the lender’s standards, there’s still a possibility they may not be able to inherit your mortgage. Mortgage transfers are a complicated and sometimes arbitrary process. Keep on reading to find out if you’re eligible for a mortgage transfer.
Generally speaking, mortgage transfers are nearly impossible to obtain. After you sell your house, the new buyer will have to start with a new mortgage, and you’re expected to pay off the remainder of your mortgage with proceeds from the house sale. Mortgage transfers are complicated because of due-on-sale clauses. A due-on-sale clause is a provision in a mortgage contract that requires the mortgage to be paid in full upon selling the property that secures the mortgage. These mortgages aren’t assumable, which helps protect lenders against below-market interest rates. Fortunately, there are a few exceptions to these strict rules worth considering.
Some loans don’t have a due-on-sale clause provision so they can be transferred from seller to buyer. Mortgages that lack a due-on-sale clause are known as assumable loans. There are two main types of assumable loans: VA loans and FHA loans.
A VA loan is a mortgage loan that’s backed by the U.S. Department of Veteran Affairs. VA loans help U.S. veterans and active duty service members purchase a home. Due to the nature of their careers and frequent moves, the VA designed these assumable loans for servicemembers. Loans closed before 1988 can be easily transferred with no additional interference from the lender. VA loans are a rarity, given the fact they’re now over 30 years old. Loans closed after 1988 require the transfer to be approved by a lender, and the person on the receiving end of the transfer must meet specific income standards and have a good credit history.
FHA loans, also known as Federal Housing Administration loans, are designed to help low-income families qualify for a mortgage so they can buy a home. These loans are government-backed, which guarantees the lender won’t suffer a financial loss if a borrower defaults on the mortgage. The loan must have closed before 1989 to qualify for a transfer without the approval of a lender.
As you can see, dealing with a mortgage transfer is a headache. The likelihood of encountering a potential buyer who meets the criteria for a mortgage transfer is slim to none. You’re better off selling your house to a home buyer company. If you live in Fort Worth, Texas, and are in the process of selling your house, contact Texas Sell Now for an all-cash offer.