Buying · Financing

The 3% mortgage you can inherit, and the gap that decides it

Roughly half of American mortgages are still sitting at or below 4%. Some of them are attached to houses that are for sale, and some of those loans can be taken over rather than paid off. Worth chasing, and cheaper than borrowing today, but far less free than the headline rate suggests. You assume the balance, not the price.

Why this exists right now

The rate rise did not reprice existing mortgages. It froze them. Homeowners who borrowed in 2020 and 2021 are sitting on money that no longer exists at any price, which is why so few of them move. As of the third quarter of 2025, Redfin put 51.5% of outstanding American mortgages at or below 4%, and nearly 69% at or below 5%. One in five was still under 3%.

Those numbers are the whole opportunity. A loan at 3.1% written in 2021 is an asset, and unlike almost every other asset attached to a house, it can sometimes be transferred to the buyer instead of paid off at closing.

What is assumable

Loan type	Assumable?
FHA	Yes. All FHA-insured mortgages are assumable. Loans written after 1 December 1986 require the buyer to pass a full creditworthiness review
VA	Yes, including by buyers who are not veterans, subject to lender and VA approval
USDA	Yes, with agency approval
Conventional	Almost never. The due-on-sale clause lets the lender demand payment in full on transfer

An assumption is a formal transfer. The buyer applies, is underwritten, and takes the loan over, which on an FHA assumption means the same income, credit and asset review as a new application.

The gap between the balance and the price

You assume the seller's remaining balance, not the purchase price. You still owe them the difference, and it comes from your own cash or from a second loan at today's rate. The second loan is what undoes the advantage, and it is where most of these deals fall apart.

A real South Shore shape. A two-family at $575,000, the seller has $310,000 left at 3.1%, and you have 5% to put down.

The headline said 3.1%. You are paying 5.33%. Financing the whole purchase with a new conventional loan at 6.75% would cost about $3,771 a month, so the assumption is better by $282 a month, or $3,384 a year. It is not the thousands people imagine when they hear the number 3.1%.

The seller's equity decides whether this works at all. A seller who bought in the last few years with little down leaves a small gap and a strong assumption. A seller twenty years in has an enormous gap, and the arithmetic collapses.

What it costs and how long it takes

Item	Typically
FHA assumption processing	$500 to $900
VA lender processing fee	Capped near $300 with automatic authority, about $250 on prior-approval files
VA funding fee	0.5% of the balance assumed, on most non-veteran assumptions
Time to close	Roughly 45 to 90 days, longer than an ordinary purchase

That timeline is a negotiating problem as much as a paperwork one. A seller with competing offers has to be persuaded to wait, which means an assumption offer often needs to be stronger elsewhere to win.

How you find one

This is the part that makes assumable loans different from every other topic on this site: you cannot do it from a search box. Assumable financing is not a field you can filter on a public portal. Finding these means working the MLS for the property types you want, then calling listing agents and asking what the existing financing is, one at a time. Many will not know offhand and will have to ask their seller.

Which is to say it is legwork, and it is the legwork an agent does. If you want the South Shore two and three-families with assumable FHA or VA paper on them, that list does not exist until someone builds it by phone.

Questions people ask

Can anyone assume an FHA loan?

Any buyer can apply, including someone unrelated to the seller. On loans written after 1 December 1986 the buyer must pass a full creditworthiness review covering income, credit and assets, much like a new application. Approval comes from an FHA-approved lender.

Do I have to be a veteran to assume a VA loan?

No. A non-veteran can assume a VA loan with lender and VA approval. But if the buyer is not an eligible veteran substituting their own entitlement, the seller's entitlement stays tied to the loan until it is paid off, which limits what a veteran seller can do when they want to buy again.

What happens to the difference between the loan balance and the price?

You cover it, either in cash or with a second lien at today's rate. That gap is what determines whether an assumption is worth doing. On a $575,000 purchase with a $310,000 balance assumed at 3.1% and 5% down, the $236,250 gap financed at 8.25% produces a blended rate of about 5.33%, not 3.1%.

Are conventional mortgages assumable?

Almost never. Conventional loans carry a due-on-sale clause allowing the lender to demand repayment in full when the property transfers. Assumable financing in practice means FHA, VA and USDA.

Does an assumption release the seller from the debt?

Only if it is documented in writing. The lender's approval of the buyer's creditworthiness triggers the release, but a seller who transfers the property without obtaining written release remains liable for the loan.