Is My Mortgage Assumable? How to Tell by Loan Type

The short answer

Whether a mortgage can be assumed depends first on the program behind it. VA, FHA, and USDA loans can be assumed by a qualified buyer, with approval. Most conventional loans cannot, because of the due-on-sale clause in the loan documents. So the first fact to pin down is the loan type, and the last word on any individual loan belongs to the servicer.

This page walks through where the loan type is written down, what each program's rule actually says, and how a borrower can get the servicer's answer in writing.

Where the loan type is written down

Three sets of documents from the original closing usually answer the question.

The Closing Disclosure. Federal disclosure rules require the Closing Disclosure to label the "Loan Type" as Conventional, FHA, VA, or Other, with a brief description for other government programs such as USDA (12 CFR 1026.37(a)(11)). The same form carries a line labeled "Assumption," stating whether a later buyer may be permitted to assume the loan on its original terms (12 CFR 1026.38(l)(1)). An owner who kept the Closing Disclosure from the purchase or refinance has both answers on one page.

The note and the mortgage or deed of trust. On a VA loan, at least one of these instruments has to carry a conspicuous notice in substantially this form: "This loan is not assumable without the approval of the Department of Veterans Affairs or its authorized agent" (38 U.S.C. 3714(d)). Finding that sentence settles the program question.

The monthly mortgage statement. It does not always state the program, but it identifies the servicer and how to reach it, which is where the CFPB points borrowers looking for the servicer's contact details (CFPB). The servicer is the company that would process an assumption, and it is often not the lender named at closing.

Loan type by loan type

The sections below cover each row in more detail.

VA loans

The rule is 38 U.S.C. 3714, and its approval requirements apply to loans "for which commitments are made on or after March 1, 1988." VA's own statement of borrower rights, VA Form 26-8978, puts it plainly: "For all VA Loans committed on or after March 1, 1988, you may sell your home to someone who agrees to assume your loan if the loan holder or VA approves the creditworthiness of the purchaser(s)."

The same form carries the warning that matters most to an owner: "The loan may become immediately due and payable if you do not obtain approval of the loan assumption before selling your home." Assumable, on a VA loan, means assumable through the servicer's approval process, not by handing over the payments.

The buyer does not have to be a veteran. What the buyer's status changes is the seller's entitlement, which stays tied to the loan unless an eligible veteran buyer substitutes their own. VA loan assumption requirements covers the buyer side, and VA entitlement and substitution covers what the seller's benefit depends on.

FHA loans

The governing regulation, 24 CFR 203.512, is titled "Free assumability; exceptions." It bars the lender from imposing or enforcing restrictions on assumption of an FHA-insured mortgage except where the rules permit them.

The main exception is a credit review. Where the mortgage requires approval, the servicer may not approve a sale unless "at least one of the persons acquiring ownership is determined to be creditworthy," with narrow exceptions such as a transfer by devise or descent. The regulation also bars approving a transfer to someone who cannot be approved because the home will not be a primary residence or a permitted secondary residence, which in practice excludes investors. The due-on-sale clause that backs these rules up is required for loans whose application is dated on or after December 1, 1986.

The former FHA handbook, HUD 4155.1, summarized the program the same way. Its chapter on assumptions opened with "All FHA-insured mortgages are assumable" and stated that mortgages closed on or after December 15, 1989 "require credit qualification of those borrowers wishing to assume the mortgage" (former HUD 4155.1, ch. 7). On any FHA loan likely to be on the market today, the buyer applies and is reviewed. FHA loan assumption covers the mortgage insurance that transfers with the loan.

USDA loans

USDA guaranteed loans are governed by 7 CFR 3555.256. The lender has to obtain USDA's approval before consenting to a transfer with an assumption, and the conditions are stricter than on VA or FHA loans:

• The buyer has to meet the program's borrower eligibility requirements, the same rules that apply to a new USDA loan.
• Any new rates and terms cannot exceed those allowed for new loans, and the interest rate cannot exceed the rate on the initial loan.
• A new guarantee fee, based on the remaining principal balance, is paid to USDA.
• The seller "must remain personally liable" for the debt.
• A property in an area that has since stopped qualifying as rural can still be assumed.

The personal liability point is the one that surprises sellers. On a USDA loan, an approved assumption does not, under this rule, release the original borrower. The regulation also lists family transfers, such as a transfer to a spouse after a divorce or to a relative after a borrower's death, that do not trigger the due-on-sale clause and that keep the guarantee in place. USDA loan assumption covers the income and location tests.

Conventional loans

Conventional loans typically carry a due-on-sale clause, and federal law lets a lender "enter into or enforce a contract containing a due-on-sale clause" (12 U.S.C. 1701j-3(b)(1)). Selling the home triggers the right to demand payment of the full balance, which is why most conventional loans cannot be assumed. Are conventional loans assumable? covers the conventional side in more depth, and which mortgages are assumable compares every loan type.

There are two narrow openings:

• Some adjustable-rate loans. Fannie Mae's Servicing Guide authorizes servicers to allow transfers of ownership on "All ARMs and GPARMs," with listed exceptions that include certain ARM plans and loans "that have been converted to fixed-rate mortgage loans." The buyer's credit and financial capacity have to be acceptable under Fannie Mae's underwriting guidelines.
• Certain family transfers. On homes with fewer than five dwelling units, the same federal law bars a lender from exercising the clause over specific transfers, including a transfer to a relative after a borrower's death, a transfer in which the borrower's spouse or children become owners, a transfer under a divorce decree, and a transfer into a living trust in which the borrower remains a beneficiary. Those protections stop the loan from being called due; they are not the same as a formal assumption that changes who owes the money. Assuming a mortgage from a family member covers the difference.

Asking the servicer in writing

The loan documents describe the program. Only the servicer can confirm what it will approve on a specific loan today, and federal servicing rules give a borrower a formal way to ask.

Under 12 CFR 1024.36, part of the rules that implement the Real Estate Settlement Procedures Act, a written request that "includes the name of the borrower, information that enables the servicer to identify the borrower's mortgage loan account, and states the information the borrower is requesting" has to be handled as an information request. The servicer has to acknowledge it in writing within five days and generally respond within 30 days, not counting weekends and legal public holidays. It can extend the 30 days once, by 15 more, if it notifies the borrower in writing before the deadline.

A few practical details from the rule and the CFPB's guidance:

• The CFPB notes that a borrower can call or write to the servicer, and that a letter may bring more protections than a call.
• A note written on a payment coupon does not have to be treated as an information request.
• A servicer "may use a special address" for these requests. If it does, the letter has to go there. The CFPB says the address generally appears in a servicer notice, on the monthly statement or coupon book, or on the servicer's website.
• The CFPB publishes a sample letter for requesting information on the same page.

The rule protects the borrower, meaning the person whose loan it is. A prospective buyer is not the servicer's borrower, so the written request normally comes from the seller. Questions an owner might put in the letter include whether the loan permits assumption, which program the loan belongs to, how the servicer's assumption application works, and what it charges to process one.

What "assumable" does not settle

Confirming that a loan can be assumed answers only the first question.

Approval is still required. On every assumable program, the buyer applies and is reviewed. The assumption approval process covers how long that takes.

Liability depends on the program. On a VA loan, a seller who notifies the holder in writing before selling, to a buyer the holder approves, is "relieved of all further liability to the Secretary" under 38 U.S.C. 3714(a). On a USDA loan, as above, the seller stays personally liable. Selling your home as assumable covers the seller's side in detail.

The cash gap is separate. The assumed loan covers only its remaining balance. The difference between that balance and the sale price is paid some other way, and it is often the deciding number. How much cash do I need works through it.

Loan terms and servicer practices vary, and the documents for an individual loan govern over any general description, including this one. This is educational information, not financial, legal, or lending advice.