The Mortgage Does Not Transfer Just Because the House Sells
This is essential.
The buyer cannot simply say:
"I'll take over your loan."
A formal assumption typically requires:
- Servicer involvement
- Buyer application
- Underwriting
- Loan documents
- Seller-release considerations
Escrow's Role
Escrow and title may coordinate:
- Purchase contract
- Buyer funds
- Seller equity
- Closing documents
- Recording
- Assumption documentation as required
- Other liens and obligations
Seller Equity Still Has to Be Paid
The buyer assumes a loan balance, not the difference between that balance and your sale price.
Example
Sale price = $600,000
Assumable balance = $425,000
The buyer must still address approximately $175,000 of seller equity before other transaction adjustments.
How that equity gap is funded is negotiated between buyer and seller, often through the purchase agreement.
VA Sellers Need Extra Attention
A VA seller should understand both the release of liability and the VA entitlement consequences before closing. They are two separate questions.
FHA Sellers
Seller-release procedures should likewise be confirmed through the actual servicer process rather than assumed.
Why Listing It Correctly Matters
If the seller has a highly attractive existing loan, Lisa can market that financing opportunity without making an approval guarantee.
Important
Correct: "Potential assumable FHA financing, subject to servicer approval and buyer qualification." Incorrect: "Guaranteed 3% mortgage for buyer." Never promise an approval or a rate you cannot deliver.
