In a high-interest-rate market, many homebuyers consider assuming an FHA loan as a strategy to secure a lower mortgage rate and reduce upfront costs.
An FHA loan assumption is when a homebuyer takes over the remaining mortgage obligation of a seller’s FHA-insured home loan instead of getting a brand-new loan, so they then inherit the same interest rate, monthly payment, and repayment term that the seller had.
So why the surge in interest now? Rising rates and steep home prices have pushed buyers to look for creative ways to stretch their budget, and FHA loan assumptions offer a shortcut to yesterday’s cheaper financing.
This guide breaks down exactly how to assume an FHA loan.
FHA loan assumption means a buyer takes over (or assumes) the seller’s existing FHA mortgage. This can be an incredible opportunity when the seller’s rate is far below today’s market rates. In fact, as of early 2025, roughly 73% of U.S. mortgage holders have rates below 5%, while new 30-year loans average around 7%.
Higher interest rates and rising home prices have made typical mortgages less affordable, but by assuming an FHA loan, a buyer might inherit a 3% rate (or lower) instead of taking a new loan at 7%, potentially saving hundreds per month.
Beyond securing a much lower interest rate than the available rates on new loans, FHA loan assumption also includes the possibility of lower closing costs. The buyer typically pays a one-time assumption processing fee to the lender (capped by HUD, more on that below) plus minimal closing charges, often totaling less than a brand-new mortgage’s closing costs.
There’s also no need for a new FHA loan origination fee or discount points and potentially no new mortgage insurance upfront premium.
All these factors mean assuming a loan can be cheaper upfront than taking out a new mortgage.
However, like with any loan, the buyer must qualify and be approved by the current lender (and by FHA guidelines), and if the home’s sale price is higher than the loan’s balance, the buyer must figure out how to cover that difference (either in cash or secondary financing).
Not just anyone can walk in and take over an FHA mortgage. You must meet the FHA loan assumption requirements set by both the lender and the FHA.
Generally, the buyer assuming the loan must qualify just as they would for a new FHA loan. That means demonstrating a sufficient credit score, stable income, and a reasonable debt-to-income (DTI) ratio to show you can afford the payments.
Typically, lenders want to see at least a 580 credit score (since that’s the minimum for a regular FHA with 3.5% down), and a DTI around 43% or less (though some flexibility may exist). You should expect a full credit check and underwriting process because the bank won’t approve the assumption without vetting your finances.
FHA loans are not automatically assumable without lender involvement since the current loan servicer must approve the transfer. The lender also coordinates with FHA/HUD to ensure all rules are followed. For example, they will eventually need to file paperwork releasing the seller from liability once the assumption is complete.
FHA assumptions are not for investors looking to flip houses or rent them out.
If the FHA loan originated after December 15, 1989 (which includes virtually all modern FHA loans), the person assuming it must plan to live in the property as their principal residence. Loans from before that date had looser rules, some were “freely assumable” even by investors, but those older mortgages are very rare now.
Not all home listings advertise assuming an FHA loan as an option. Here’s what you can do to find them.
You’ll want to know the loan balance, interest rate, monthly payment, loan term remaining, and whether the loan is current. Ask the seller for a recent mortgage statement and verify it’s an FHA-insured loan. It’s also wise to ask if there are any second mortgages or liens, as those could complicate an assumption.
At this stage, you and the seller should also discuss the home’s sale price and how you (the buyer) will handle any differences between the sale price and the loan balance (the equity).
Reach out to the loan servicer early to confirm assumability and request application instructions. The lender will provide required forms, fees, and a timeline (typically 45–90 days).
Assuming a loan requires you (the buyer) to qualify for the mortgage; you’ll go through an application much like a regular mortgage application. The lender will provide forms to fill out, so expect to supply personal information, such as Social Security number, employment details, income, debts, etc. You’ll also need to submit financial documents such as recent pay stubs, W-2s or tax returns (often 2 years’ worth), bank statements, and any other records to verify your ability to repay.
FHA assumes standard credit criteria: ~580+ score and ≤43% DTI.
The lender’s underwriting team will verify your ability to repay. Most FHA assumptions don’t require a new appraisal but do require title checks and proof of insurance.
If approved, sign the Assumption Agreement and HUD release form. Pay the seller any equity, plus fees. After closing, the loan and property title will transfer to your name.
While assuming an FHA loan is often cheaper than getting a new mortgage, it’s not free:
Even if you’ve learned how to assume an FHA loan, knowing what can go wrong is important.
Yes, before you can assume an FHA loan, you must qualify. This means you need to meet standard FHA loan assumption requirements, including credit, income, and debt-to-income (DTI) guidelines set by both the FHA and the lender.
FHA doesn’t require a down payment, but if the home’s price exceeds the loan balance, you must cover the difference (the seller’s equity).
You need a credit score of 580+ when assuming an FHA loan, though some lenders may ask for better scores.
Yes, you’ll continue the seller’s monthly mortgage insurance (MIP) on an assumed loan unless it has already ended. Upfront MIP was paid when the loan was originated, so buyers do not pay upfront MIP when assuming an FHA loan.
FHA loan assumption usually takes 30–90 days, depending on the lender's speed and documentation.
You can assume an FHA loan from a family member as long as you qualify and plan to live in the home.
Unless the loan originated before 1989, you can not assume an FHA loan if you do not plan to live in the property full-time.
FHA loan assumptions are available for nearly all FHA-insured loans. There’s no special designation. If you meet the FHA loan assumption requirements and the lender approves, you can take over the existing loan.
No, you can not negotiate the loan terms during an assumption. Instead, you inherit the exact terms, including rate, balance, and schedule.
If done properly, the seller is released from liability on the loan once assumption is complete.
