\n<\/p>\n
With assumable mortgages,<\/strong> you can snag a three percent <\/strong>interest rate<\/strong><\/a> even in 2023\u2019s high-interest environment. These loans exist everywhere around you\u2014you could be sitting on an assumable loan without even knowing it! So, if there\u2019s a way to pick up properties at all-time low-interest rates<\/strong>, why isn\u2019t everyone taking advantage of assumable mortgages? We brought Craig O\u2019Boyle <\/strong>from Assumption Solutions on to the show to explain.<\/p>\n Assumable mortgages aren\u2019t new,<\/strong> but most real estate agents, loan brokers, and homebuyers have no idea what they are<\/strong>. In practice, an assumable mortgage allows a homebuyer to \u201cassume\u201d a seller\u2019s loan <\/strong>with the same interest rate<\/strong>, contingencies, and principal paydown<\/a> as the seller. This means you can walk into a home with significant equity<\/strong>, a low-interest rate<\/strong>, and the same fix-rated loan <\/strong>you\u2019d be picking up from a bank. But, if you want an assumable mortgage, you\u2019ll need to know where to find one.<\/strong><\/p>\n Craig walks us through the ins and outs of assumable mortgages<\/strong>, where investors can find one, why most mortgage lenders and brokers don\u2019t know about them, and one BIG caveat you\u2019ll need to hear before you chase down this better financing. Want a lower rate and monthly payment with higher <\/strong>cash flow<\/strong><\/a>?<\/strong> Stick around; we\u2019ll give you everything you need to know to find a low-interest assumable loan in your area!<\/p>\n Dave: Jamil: Dave: Jamil: Dave: Jamil: Dave: Jamil: Dave: Jamil: Dave: Jamil: Dave: Jamil: Dave: Craig: Dave: Craig: Dave: Craig: Jamil: Craig: Jamil: Craig: Dave: Craig: Dave: Jamil: Craig: Jamil: Craig: Dave: Craig: Dave: Craig: Jamil: Craig: Dave: Craig: Jamil: Craig: Jamil: Craig: Jamil: Dave: Craig: Dave: Jamil: Craig: Dave: Craig: Dave: Craig: Dave: Craig: Jamil: Dave: Jamil: Dave: Jamil: Dave: Jamil: Dave: Jamil: Dave: Jamil: Dave: Jamil: Dave: Jamil: Dave: Jamil: Dave: Jamil: Dave: Jamil: Dave: Jamil: Dave: Jamil: Dave: \u00a0<\/p>\n<\/div>\n Interested in learning more about today\u2019s sponsors or becoming a BiggerPockets partner yourself? Check out our <\/i>sponsor page<\/a><\/i>!<\/i><\/p>\n Note By BiggerPockets:<\/b> These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.<\/p>\n
Hey, everyone. Welcome to On the Market. I\u2019m your host, Dave Meyer, joined by Jamil Damji, who looks like he\u2019s in a very dark and very\u2026 I don\u2019t even know where\u2026 Where are you?<\/p>\n
I\u2019m in a penthouse in The Mirage in Las Vegas. For any of you that right now are shaking your head, or feeling like that\u2019s very boujee, it is, but let me-<\/p>\n
It is.<\/p>\n
Let me very quickly qualify the boujeeness of it. Pace was also in the penthouse in the Mirage. We\u2019re both speaking here at a summit. However, his costs $1,000 a night, and mine was $200 a night, because I slipped the front desk girl a $50 bill, and asked her if there was any upgrades.<\/p>\n
That\u2019s all it took?<\/p>\n
That was it.<\/p>\n
Wow. Good tip from Jamil. That\u2019s awesome. Well, nothing beats\u2026 It\u2019s so dark where you are. Nothing beats the blackout shades available in Las Vegas. They know that you need to be able to sleep at any time of day, and it looks very comfy for you.<\/p>\n
The blackout shades are a double-edged sword, because they are also called podcast killers.<\/p>\n
Did you have a rough night last night?<\/p>\n
Not a rough night, just\u2026 It\u2019s Vegas, man, all the things.<\/p>\n
It\u2019s so much fun. All right, well, we\u2019ve got a fun thing as well to talk about today. We have Craig O\u2019Boyle, who\u2019s joining us to talk about assumable mortgages, which I honestly\u2026 I sometimes just group a lot of creative finance together in my head, and it\u2019s so helpful to really understand the differences and nuances between different types of creative financing. Honestly, I didn\u2019t really know that there was a big difference between generalized assumable mortgages and sub two, which I know your buddy Pace is a big proponent of, but I learned a lot. Did you?<\/p>\n
Man, the entire time, I\u2019m sitting here thinking, \u201cI don\u2019t think Craig understands just how\u2026\u201d or he does, but he\u2026 I mean, I want to help Craig. I want to help Craig so much just shout about this from the rooftops, because this is one of those moments where I say, \u201cO\u2019Boyle, O\u2019Boyle, O\u2019Boyle.\u201d<\/p>\n
You just can\u2019t wait to blow this thing up.<\/p>\n
I think that there\u2019s a massive opportunity here, and I think that if marketed correctly, and if you educate agents in the right way, we could start creating more activity in the real estate market and so many homes that are sitting on the market stale with trade.<\/p>\n
Totally. That makes a lot of sense. Well, let\u2019s just get into it then. We\u2019re going to welcome on Craig O\u2019Boyle, who\u2019s visiting us and joining from Assumption Solutions. But first, we\u2019re going to take a quick break.
Craig O\u2019Boyle, welcome to On the Market. Thanks so much for being here.<\/p>\n
Thanks for having me.<\/p>\n
Can you tell our audience a little bit about yourself? Who are you, and what is your expertise related to real estate investing?<\/p>\n
Well, I got licensed in the real estate business as a real estate broker in October of 1995. I was 19 years old, so I\u2019ve been in a little over 27 years. I guess the reason you have me here today though is during that time, I\u2019ve sat at many closing table with buyers, and the topic of the assumability of certain mortgages would come up. It hadn\u2019t made sense for a very long time, because rates have been dropping. About early to mid 2022, we went through a pretty big shift in the rate climate, and I started Assumption Solutions with a partner to help people understand and complete mortgage assumptions.<\/p>\n
All right. Well, very timely of you. Let\u2019s just start at the top. What is an assumable mortgage?<\/p>\n
An assumable mortgage is the\u2026 Well, the only assumable mortgages that exist are government-backed mortgages. FHA, VA, and USDA mortgages can be assumed. What that means is when you purchase a property, instead of getting a new mortgage, you take over the existing mortgage at the existing rate and term that are in place. That was something that hasn\u2019t really existed in the marketplace since the late \u201980s, early 1990s. That\u2019s because rates have effectively been dropping during that entire time. We\u2019re now in a climate where rates have effectively doubled in just a few short months, and it makes sense.
The ones that used to be around used to have what they called non-qualifying assumables, which a non-qualifying assumable is just like what it sounds like. Anybody basically could say, \u201cI want to take that over, jump in, and become responsible for it.\u201d Those are all gone. Now, the only assumable mortgages are qualifying assumables, meaning you have to meet the criteria of the mortgage when it was taken out and put in place. We\u2019re here to help people process those in transactions.<\/p>\n
Essentially, what we\u2019re talking about is a creative solution to purchasing a property, but by doing it by the book. We\u2019re actually going to notify the bank. We\u2019re going to let the bank\u2026 We\u2019re going to say, \u201cHey, guys, I\u2019m taking over this property. I\u2019m not doing it subject to\u2026 I\u2019m actually going to take over this property. I\u2019m going to qualify for the mortgage so that this due on sale gorilla that for me is the biggest problem in subject two is appeased and fed.\u201d Is that essentially, Craig, the way that the audience should interpret this concept of assumable mortgage?<\/p>\n
Technically, this is\u2026 Unless it\u2019s some private financing or something, this is really the only legal option out there for taking over mortgage. When you take it over, it completely releases the seller and original note holder from liability and responsibility, and transfers it to the new buyer.<\/p>\n
How likely is the bank to say yes?<\/p>\n
Well, so in our processing of this right now, the biggest challenge that we face is the servicers really don\u2019t even understand it themselves. They haven\u2019t been doing these. They don\u2019t have departments for these, so we find that we are actually doing quite a bit of education on their side. We see them putting out information that is patently false and incorrect often to both the owner of the curb property, and the potential buyer of the property. So, in processing these, we\u2019re trying to educate them because we actually see a lot of potential liability to servicers for putting out wrong information to people.
Because if you basically tell a guy who\u2019s got a deal, \u201cOh, this can\u2019t be done,\u201d even though it\u2019s part of the program that was put in place by VA, FHA, USDA as a benefit to those buyers, you tell them it can\u2019t be done, and then they can\u2019t sell their property, or they lose money. Well, I could see an attorney coming along at some point, and filing some lawsuit against them. We\u2019re trying to straighten that out. We\u2019re using a lot of resources that these government organizations actually have out there about how it should work, but it\u2019s a challenge. There\u2019s a lot of craziness out in this right now because it\u2019s new.<\/p>\n
Craig, just so I fully understand this, assuming a mortgage is basically when the buyer takes over the existing mortgage of the seller. There\u2019s two ways to do that. One is subject two, but the problem, as Jamil pointed out, with subject two is that it\u2019s not necessarily with the bank\u2019s blessing. There\u2019s this clause in most mortgages called the due on sale clause, where basically if the bank catches wind of what\u2019s happened, and for whatever reason decide they want to say, \u201cYou owe me all the loan balance,\u201d they can do that. That is within their rights.
Then what you\u2019re doing with these qualifying assumable mortgages is all above board, and so it\u2019s just\u2026 It\u2019s like subject two, but it\u2019s a little bit less risky. Is that the appeal above subject two?<\/p>\n
Well, if you\u2019re the seller of the property, it\u2019s the best thing you can do if you do it. Now, the challenge is if you\u2019ve got a conventional loan, you don\u2019t have the option. If you don\u2019t want to get rid of that existing note on a conventional scenario, then I guess your only option is subject two. But if you\u2019re the seller of the property, and you can sell it, and you can no longer be on that note, it\u2019s a huge benefit. Because if you\u2019re going on in the future to buy something, it\u2019s not going to show up on your credit, on your DTI, or any of those issues, because you have been released.
Not to mention the issue with if the guy that you let take it over has a shady nature, or doesn\u2019t come through on making those payments, and it goes to foreclosure, well, that loss is coming on you, because you\u2019re still on the hook On that note as far as the lender\u2019s concerned,<\/p>\n
Craig, that\u2019s a great point. As an investor, you often think of the implications as the buyer. But as a seller too, it obviously makes more sense.<\/p>\n
What\u2019s interesting is in Canada, which is where I began my journey in real estate investing, they have actually outlawed assumable mortgages. The reason for it is because the banks and the government in Canada have a very, very close relationship. So, it\u2019s safe to say that in the long-term scheme of the bank\u2019s interest, this doesn\u2019t meet the top of the pile. Given that, who are the advocates, or who are the processors for the assumable mortgage? Because I could guarantee that the bank is not going to put out a person, and they\u2019re not going to lend you a loan originator to help with this process, especially if we\u2019re talking about assuming a mortgage that\u2019s 3.5%, where right now, they\u2019re making money hand over fist at six or seven.
What does that process look like, and what army of people do you need to bring to the closing table in order to process and actually create this situation from start to finish?<\/p>\n
Sure. You\u2019re right, there\u2019s low motivation on the servicer side. The people that approve these existing mortgage servicer is the one who ultimately has to qualify, receive the packet, and process this. Their motivation is not high. A lot of people that we work with and train are real estate agents, because they are on the front lines with clients who have these marketable assets that they\u2019re trying to sell. So, we educate them about the process, and then when they have a deal, where the buyer and the seller\u2019s going to do it, we onboard it, and we process it. We deal directly with the servicer.
A lot of the agents are out there going to mortgage brokers to try and get information. Mortgage brokers, mortgage bankers, loan originators, they have zero interest in being involved in these, because they don\u2019t make any money. It\u2019s for sale by owners with real estate agents. You\u2019re generally not part of the equation.<\/p>\n
Who\u2019s going to get greased to make this happen? Essentially, what I\u2019m trying to understand is do I got to pay the loan originator? Do I got to\u2026 Do I need to make sure that the real estate agent makes their commission?<\/p>\n
Well, you do pay us as at Assumption Solutions. We charge a fee to both the buyer and seller to get a completed assumption. The servicers do have the right to collect a fee for processing these. We\u2019re finding that truthfully, on average, they\u2019re somewhere between $1,000 and $2,000. That\u2019s a lot less than a loan originator would collect at a new origination, so it\u2019s lower. It\u2019s not as much motivation, but our company is born out of something my partner did in the last downturn, where he created a company that effectively processed short sales on behalf of a buyer and seller to make a real estate agent\u2019s life easier to get more deals done, and dealt with the servicers to get short sales done.
Now, this is a lot less of a pain point than that. They were getting those done, but I mean, the servicers in those cases, it was like, \u201cHow do we limit our loss?\u201d At least in this scenario, it\u2019s like, \u201cWe can make a little money. We keep a loan that\u2019s on the books going forward,\u201d but they\u2019re not originating a new loan at double the interest rate, so not a ton of motivation. I think that\u2019s a little bit behind the fact that they don\u2019t have the process in place and the staff in place, and even the knowledge base that is in place to do these right yet.
We are trying to shorten that curve, and make it simpler, but it\u2019s a process that takes, once you start it, anywhere from 60 to 90 days. Now, the short sale process when it was in the heyday, I mean, it could take six to 12 months. We think it\u2019s still better than that timeframe.<\/p>\n
Because it takes 60 to 90 days, is the type of seller and therefore the type of property that you see go through these transactions, are there unique characteristics about it? Are these distressed properties, or is there something unique about them?<\/p>\n
You\u2019re actually not going to be able to complete one on a distressed property.<\/p>\n
Oh, because it doesn\u2019t qualify?<\/p>\n
If the loan is not current, it\u2019s very unlikely that the servicer will allow it to be assumed. There\u2019s important things that your listeners should know, especially since you guys are all about the investment side of the world. The only people who can qualify to assume these mortgages are owner occupants. So if you\u2019re coming at this from an investment standpoint, you probably need to be looking at, \u201cI\u2019m going to be an investor who occupies and then turns around and goes to an investment down the road after a significant period of time so that that loan is taken over by you as an owner occupant.\u201d<\/p>\n
I think the main concept here is that the banks are wanting to make sure that there\u2019s not a straw buyer situation, or you\u2019re not the straw buyer, and saying, \u201cI\u2019m going to live in this.\u201d Then seven months or 10 months or a year down the road, you say, \u201cI changed my mind.\u201d<\/p>\n
Well, with regards to a lot of those loans, number one, it\u2019s about intent. It\u2019s hard to put a timeframe on intent, but if you are in there for 30 days, and then it\u2019s a rental, I think you could be in some trouble, but a year. I mean, just talking about VA loans benefit to a veteran. Veterans transfer all the time around the country with their orders, so it\u2019s very common to see a guy get a house, VA loan, and then the army sends him somewhere 6, 9, 12, 18 months later, and it turns into a rental. Matter of fact, in my career, I\u2019ve helped several people.
Gosh, I remember dealing with a gal who she was retiring. She was stationed in the Pentagon, and she was liquidating 10 or 12 homes around the country that she had bought everywhere she went, and was netting out a couple million dollars. This was back in probably the early 2000s. The key with regards to assuming is intent, and if your intent is not to occupy that property when you take it over, then you\u2019re in trouble with loan fraud.<\/p>\n
Well, would this work with any residential mortgage? Could you do this with a duplex or a quadplex, for example, live in one unit, and live in the others?<\/p>\n
Let\u2019s take FHA, specifically. FHA, you can do multi-family properties up to one to four units, where you live in one, and rent the others out. I actually connected with a gentleman in the Bigger podcast\u2019s\u2026 Is it chat area or something in there who had some questions, because he had a property in Miami that he bought it, lived in. It was a fourplex, lived in it and was looking to sell it, and was getting a lot of people interest when they put it on the market, and mentioned that it was assumable. The challenge is all the people that were coming at them, nobody wanted to live in one of the units.
I said, \u201cI look at it this way. When you\u2019re marketing something to sell, it\u2019s one more asset to the property, because when I put a home for sale, I\u2019m marketing all the assets about it.\u201d I\u2019m marketing if it\u2019s got updates like a new kitchen, if it\u2019s got a great lot, if it\u2019s got a great view, and I\u2019m marketing if it\u2019s got an assumed mortgage. It doesn\u2019t mean it\u2019ll sell that way, but it\u2019s one more asset to market when you\u2019re selling something. If you\u2019re buying something, and if you can go that route, why not jump on it and save?
I mean, if you look at rates, your average $400,000 mortgage\u2026 I think in November of 2021, the rates were about 3.1%. By November of 2022, they\u2019re about seven-ish, right? The difference in payment is $953 a month.<\/p>\n
Over the life of the mortgage, Craig, what I want to really understand and impart to the listeners right now is what is the value of the note, and can I create an opportunity for me as a homeowner? Because you\u2019ve been using some very interesting language when you call the note the asset, because he\u2019s talking about, \u201cI\u2019ve got a renovated kitchen. I\u2019ve got a renovated bathroom.\u201d These are all things that add or force appreciation to a deal. You\u2019ve got 3.5% mortgage attached to your property. Right now, the market says seven. So over the life of this mortgage, there\u2019s a possibility of that gap costing hundreds of thousands of dollars.
So, what is the value, and how much could a homeowner add to their situation by saying, \u201cLook, I\u2019ve got this beautiful asset that I\u2019m going to allow you to take over or assume the language is beautiful. Assume in this sale, but I want this amount of money as a premium in order to allow you to do it.\u201d What\u2019s the value of this asset, Craig? I think that there\u2019s a lot of people right now. The bells are ringing in their minds, because essentially, the retail real estate market is slowed substantially. If you\u2019re a seller right now, and you\u2019ve got an assumable mortgage, now, you\u2019ve got this gorgeous, beautiful essential asset that you can sell to the world.
What is the value of this, and can you rightfully market it in your listing verbiage?<\/p>\n
That\u2019s a great question. I think the value of the asset increases the more people know about it, understand it. Right now, when I talk to people, my point is that if you\u2019ve got two homes next to each other, and they\u2019re all the same condition, they got the same lot. They got the same view. One\u2019s got this conventional non-assumable loan on it. One\u2019s got this VA or FHA assumable loan on it. Which one should sell for more? In theory, it should be the assumable, because like I said, at 400, you save $900 a month. Although I\u2019m not sure it\u2019s easy to quantify it just that you should list your home higher.
In the market that we\u2019re in, I look at it as you might just be able to sell faster. That means if you can sell faster, technically, you probably sell for more. Because if your home has been on the market for 60, 90, 180 days, you\u2019re likely chipping away at your list price over time. Now, the more this spreads, and the more people start hunting it, the more they sell faster, or you\u2019re able to say, \u201cNow, we can sell these for more, because they\u2019re out there,\u201d but there are a couple other things that make this process a little bit complicated that it is also a reason for me. It\u2019s difficult to say that yes, it\u2019s worth more.
Let\u2019s talk about what we call the assumption gap. You have the purchase price at 500, and you have a mortgage that exists on the property of 450. We call the difference between those two your assumption gap, which is effectively what you look at as your down payment. The big question that I get from everybody is, \u201cCan you finance that?\u201d Well, there\u2019s no guideline with the government organizations that you can\u2019t get secondary financing, but what we have found is, number one, good luck finding a lender that\u2019s looking to jump into a second mortgage position in the climate that we\u2019re in.
Then number two, if you are able to find it, it\u2019s up to the servicer who\u2019s approving the assumption whether or not they\u2019ll allow it. Everyone we\u2019ve been involved with has been a cash down payment to cover the gap. Is there an opportunity there for a second, whether it\u2019s an owner carry, whether it\u2019s all these other things? Potentially, but we\u2019re not out there telling people that that is an easy thing to accomplish, because we haven\u2019t seen it done yet. So, when you have that gap, it does limit the pool a little bit, so you don\u2019t have as many buyers.
Even though you have this asset to sell, you don\u2019t have as many buyers, because if you think of a traditional VA, FHA loan, they\u2019re designed to be low down payment entry points for buyers, for people that use them. Now, what I\u2019m finding is a lot of the people that are going through these, they\u2019re what I call the move-up person, right? They\u2019re selling something. They\u2019re coming out of something. They\u2019re jumping into these products, because of the savings and because of the long-term makes sense. I mean, we\u2019ve even seen\u2026
The best one I\u2019ve seen, the one that interests me the most that we\u2019ve processed that I\u2019m seeing is we have a loan that somebody\u2019s taken over that\u2019s 15 years old. That means it\u2019s half paid down. It\u2019s a low rate. It\u2019s low below what you could get today, but I just love the fact, and the gap is half a million dollars, but I love the fact that a mortgage amortization, it\u2019s so front loaded in interest. Guys jumping in at a low rate, where most of the interest on the loan has been paid. I love it<\/p>\n
I mean, essentially, you\u2019re at one of those very unicorn-type situations where you\u2019re paying down primarily principle at this point. If you\u2019re halfway through, and, like you said, the amortization schedule, if you look at any of that, and if you look at the way that those loans are front loaded, it\u2019s sickening. You realize just how much money you\u2019ve burnt.<\/p>\n
Well, they know most people sell within five to 10 years.<\/p>\n
I mean, you essentially are a renter for the first 10 years of a house on a purchase. This is just incredibly timely and what a wonderful way to provide a solution for people to, a, sell their property, and b, as buyers come in and get financing, that is just unavailable.<\/p>\n
Craig, I\u2019m curious. If you are a buyer who\u2019s willing to meet these conditions, owner occupy\u2026 In the BiggerPockets world, we call an owner-occupied investment house hacking. So if you\u2019re willing to do a house hack, how do you look for this? I get that you\u2019re saying that it\u2019s up to the buyer, excuse me, the seller and the seller\u2019s agent to market it. But if I am bought in and want to find one of these, what\u2019s the best way to do that?<\/p>\n
Our efforts and training with real estate agents, number one, we\u2019re training people how to expose this asset that they\u2019re marketing. In Colorado, Colorado Springs specifically where I\u2019m located, our MLS system has input fields for this, where you can input one that\u2019s an assumable loan, and then details about the loan, the PITI payment, the loan balance, the type of loan, all that kind of stuff. Nobody has used those fields in our MLS forever, so they don\u2019t even know that. A lot of the agents don\u2019t even know\u2026 I mean, most of the agents in the country have been licensed less than 10 years, truthfully.
So, we\u2019re teaching them how to put that in there, how to get it marketed. Unfortunately, a lot of the MLS systems don\u2019t pump that section of data out to public fields. I can build a client a search when they\u2019re looking for a property in our MLS system, and it emails them stuff that meets that criteria. So if you\u2019re looking for X, I can send it to you, but then you\u2019d probably have to talk to me to see it, because the visualization of that criteria is not on my client\u2019s side, unfortunately. I\u2019d love to see some changes in that. We\u2019re working on a lot of areas of contact for getting that out there.
Let\u2019s just talk about finding stuff that maybe isn\u2019t on the market that has this potentially. Because we\u2019re training agents to grow their business by finding those, there\u2019s a lot of data harvesting mailing list things that you can scrub for when things sold, what type of loans they have on them. All that kind of thing is out there. But in our local market, because we\u2019ve done so much training, we\u2019re probably the most robust with this in the country. I keep a search open. I can see every day a couple more assumable loans on the market, because in Colorado Springs, we have a huge military presence with multiple military bases here.
Between March of 2020 and March of 2022, we had 14,000 VA loans alone in our county, either originated or refinanced, which means their rates are most likely below 3.5%, some as low as two and a quarter, and that\u2019s one county. So, there\u2019s a ton out there. These products make up approximately, depending on your location, between 20% and 30% of the marketplace. The more military related your community or your area is, obviously, the more you have because of VA there, but USDA, I think, is it\u2019s more of a rural product, and it\u2019s about 1% of the market.
Then FHA can be used by anybody out there. So finding them, you really need to hunt down somebody who has access to real estate listings, but also who knows this product. Like I said, we\u2019re doing education on this all over the country with agents, because we can process these anywhere in the country.<\/p>\n
That\u2019s super helpful advice,<\/p>\n
Very helpful. My mind is just full of so many opportunities that derive from, a, awareness of the availability of your note having this clause in it, and secondly, being able to execute on that. How does somebody in a reasonable way find out whether or not their mortgage is assumable?<\/p>\n
Well, it\u2019s very obvious if you\u2019re a veteran, and you took out a VA loan, right? Veterans know their benefits. If you were a first time home buyer, and you did a low downpayment program such as 3.5%, you\u2019re most likely FHA. Now, if you don\u2019t remember what you have, usually, you can go to something like a title company, and run an ownership encumbrance report, which will show you the debts filed against your property. VA and FHA are pretty clear on their deed of trust that they\u2019re VA and FHA all over them. USDA, I mean, same. USDA and FHA are almost identical, so same thing there.
If you used a conventional product, and your downpayment when you bought your home was over 3.5%, most likely, it\u2019s not assumable. Now, I do want to jump in with one thing that is important to talk about with VA loans. VA is a veteran benefit. It\u2019s only a loan product that is available to a veteran when they take it out new. However, VA can be assumed by a non-veteran, but there\u2019s something that\u2019s important to know with that. VA\u2019s process for giving loans is determining the level of eligibility that a veteran has available to them.
So, it\u2019s like\u2026 You could do it on VA\u2019s website, but it\u2019s complicated, so I can\u2019t\u2026 It\u2019s not a dollar amount. That\u2019s not true. It\u2019s hard to say. There is a cap, but your eligibility\u2019s it\u2019s regional based. It\u2019s got a lot of factors to it. But if you let another veteran assume your VA loan, not only are you released from the liability in the assumption, but your eligibility is released as well. Meaning, you can take 100% of your eligibility to get another VA loan in the future. If you go veteran to non-veteran, the eligibility portion that you used in that loan is stuck to that loan until it\u2019s gone.
We see scenarios where for some veterans, they won\u2019t do anything except veteran to veteran assumptions. However, we see some scenarios where it makes sense. The veteran\u2019s just like, \u201cI don\u2019t care.\u201d The big one I talked about, where it\u2019s 15-year old note, the person selling that home is rather up an age. They\u2019re getting a lot of equity out of the house. They\u2019re actually\u2026 I believe they\u2019re downgrading in what they\u2019re going into, so they didn\u2019t need to use a VA loan again. We\u2019ve seen scenarios where some veterans are like, \u201cI just need out of the house. I just want it sold. Whatever sells it first, I don\u2019t care. I\u2019m still getting equity, so I\u2019ll go get a conventional loan in the future.\u201d
There is a caveat to that. With the FHA, USDA, there\u2019s no eligibility issues there at all.<\/p>\n
Awesome. That\u2019s great. Well, Craig, this has been super helpful. I\u2019m curious, do you have any other tips for our listeners just when it comes to assumable mortgage or just navigating the loan climate in 2023 before we get out of here?<\/p>\n
I mean, the best tip I can have if you want to assume something is it\u2019s really good to have your penny saved up, either you\u2019re coming out of a property, and you\u2019ve got cash to put down, or you\u2019ve been banking some money away. If you\u2019re looking to buy something, why not capitalize on that low rate? That\u2019s probably never going to come back. I mean, unless the government is foolish enough to think that just printing money is a great thing, hopefully they\u2019ve learned their lesson on that. I don\u2019t know. We\u2019ll see.
But if you\u2019ve got some assets, or you\u2019ve got some cash saved, and you\u2019re looking to get into something as cheap as possible that down the road maybe it makes the sense to turn into a rental, well, it\u2019ll cash flow a heck of a lot better with a two and a quarter rate than it will with a six and a quarter rate.<\/p>\n
All right. Well, that\u2019s great advice. Craig, thank you so much for joining us. For people who want to learn more about you or potentially work with you and your company, where should they contact you?<\/p>\n
Our company is Assumption Solutions. Our website is assumptionsolutions.com. We have lots of training. We have lots of info. We have lots of stuff that\u2019s good for whether or not you\u2019re a home buyer or home seller or real estate agent.<\/p>\n
All right, great. Well, thank you so much, Craig, for being here. We appreciate your time.<\/p>\n
Thank you.<\/p>\n
Take care.<\/p>\n
Jamil, what\u2019d you think? This seems right up your alley.<\/p>\n
Oh my gosh, there\u2019s so much right now that my mind is\u2026 I honestly feel like I need to call Craig, and I need to figure out how to bring this opportunity to America. Right now, we\u2019re sitting on this massive opportunity, where people are really struggling with affordability. When you\u2019ve got an assumable mortgage, and a reasonable seller, and an educated agent, and a buyer who obviously wants to rewind and go back in time, and get that opportunity-<\/p>\n
Now, you could do it. You could go back in time.<\/p>\n
Yes. The assumable mortgage is the DeLorean of lending products.<\/p>\n
Yes, it is. Yeah, it\u2019s amazing. It\u2019s super cool.<\/p>\n
Yes.<\/p>\n
I mean, I guess the only thing I was a little bummed about was to hear that it\u2019s only for owner occupants.<\/p>\n
That and then, secondly, just the qualification process and the unmotivated nature of the whole process, because here\u2019s the thing. This is where I always find inefficiencies happen is when we don\u2019t pay people, or people aren\u2019t being monetized or being taken care of through the process.<\/p>\n
This is not incentivized.<\/p>\n
They\u2019re not incentivized. So then if you ever work in a situation, or if you\u2019ve ever tried to navigate a situation where people aren\u2019t incentivized, I can help everybody right now understand what that feels like. Go to a government office, and try to do something.<\/p>\n
Totally.<\/p>\n
You\u2019ll see that lack of motivation from everybody working there, because there\u2019s no incentivization. So, that piece, I feel like, is going to create so much clunkiness, or make this more difficult than we might think that it could be.<\/p>\n
Than it has to be. This seems like it could be easier, and we would all wish that is what would just happen is the easiest thing. But to me, this just seems like tailor-made for people who want to make their first investment.<\/p>\n
Agreed.<\/p>\n
If you have saved up some money, and you\u2019re sitting around thinking like, \u201cHow do I get in? It\u2019s expensive.\u201d It\u2019s like, listen, this is for people who want to owner occupy. We all know house hacking is one of if not the best way for people to get started in the first place. You can house hack, plus get an interest rate from a year ago that is going to increase\u2026 They said for a $400,000 home, Craig just said that that\u2019s going to increase your monthly cash flow by nearly $1,000. That\u2019s probably more than most people pay in rent currently.<\/p>\n
I know.<\/p>\n
That would be a huge saving. So if you are new to real estate investing, I think that is huge. I think the other main lesson here is through the BiggerPockets conference and a few other things, I\u2019ve learned that a lot of our audience here on On the Market is real estate agents. To me, this is just a goldmine for real estate agents.<\/p>\n
Big time. Big time.<\/p>\n
If you have a selling contract for a qualifying mortgage, this is worth. They just said it\u2019s worth $12,000 a year. For an owner occupant, if this is a home buyer coming in to buy this, they stay on average seven years. Seven times 12, what\u2019s that? $84,000, that\u2019s $84,000 on average that it would be worth for $400,000 homes.<\/p>\n
That\u2019s the entire life of the mortgage?<\/p>\n
No, that\u2019s seven years. That\u2019s the average amount of time people stay in a mortgage. But if they\u2019re going to stay longer, it\u2019s worth even more. It just seems like\u2026 Know what you got. If you\u2019re an agent or a seller, if you have one of these qualified mortgage, that is extremely valuable.<\/p>\n
I couldn\u2019t agree with you more, Dave. I feel like this is the peacock feathers of a property right now. I think that there\u2019s a massive opportunity, especially with real estate agents feeling the crunch right now. A lot of you might be listening to this, and sitting on a house right now where you haven\u2019t had an easy time selling it. You\u2019ve got a seller who has a terrible situation, and wants to sell or whatever\u2019s going on, and there\u2019s this gap in information and execution. Real estate agents that are listening to this, please do some homework. Get ahold of Craig, and see if there\u2019s an opportunity there.<\/p>\n
Absolutely. Great advice. Well, thanks a lot, man. We appreciate you being here. For anyone who wants to connect with you, where should they do that?<\/p>\n
Well, I\u2019m always findable on Instagram at J-D-A-M-J-I. That\u2019s @jdamji. Also, I have a YouTube channel where I go live and help people underwrite and learn all about the real estate investing that I do, which is a niche called wholesale. You can find me at youtube.com\/jamildamji.<\/p>\n
Awesome. If you have any questions for me, or thoughts about this episode, please reach out to me on Instagram, where I am @thedatadeli. Thank you all for listening. We\u2019ll see you next time for On The Market.
On The Market is created by me, Dave Meyer, and Kailyn Bennett, produced by Kailyn Bennett, editing by Joel Esparza and Onyx Media, researched by Pooja Jindal, and a big thanks to the entire BiggerPockets team. The content on the show On the Market are opinions only. All listeners should independently verify data points, opinions, and investment strategies.<\/p>\n