March 18, 2015
A reader asks, “Myself and my brother bought a house together in 2010, and now my brother and his adult son (nephew) would like to assume the mortgage and remove me of any obligation instead of going through the process/cost of buying/selling. Is this possible with an FHA loan?”
A home purchased with an FHA mortgage loan may be assumed by another party under certain conditions. The FHA/HUD official site says the following about FHA loan assumptions:
“Assumption of an FHA-insured mortgage is a servicing function where the responsibility of the mortgage is acquired by another person through either Simple or Creditworthiness process. Individuals may assume mortgages originated prior to December 1, 1986, by utilizing the “Simple Assumption” process.”
“For those mortgages originated on December 1, 1986 and thereafter, HUD placed certain restrictions on the assumption of those FHA-insured mortgages and those mortgages have to go through the Creditworthiness Assumption process.”
Those who want to assume an FHA mortgage should know that the FHA requires occupancy for the lifetime of the mortgage, and there is a prohibition on investors assuming FHA mortgages, i.e. an individual who wants to assume the loan to use the property for investment purposes.
The assumption of an FHA home loan requires the participation of the lender, and the person assuming the loan will, as mentioned above, be required to credit-qualify.
Assuming an FHA mortgage is not a way around the credit qualifying process. That’s not to imply that the reader question above was asked with that in mind, but borrowers and potential loan assumption applicants should know the credit qualifying process is required as a condition of loan approval.
Do you have questions about FHA home loans? Ask us in the comments section. All comments are held for review.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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