Assumable Mortgages in Grand Rapids: How to Take Over a Seller's Low Rate
An assumable mortgage lets a buyer take over the seller’s existing home loan, keeping its interest rate, balance and remaining term. FHA and VA loans can be assumed with the approval of the company that services the loan, USDA loans with USDA’s approval, and most conventional loans cannot be assumed at all. The catch is the equity gap: the buyer pays the difference between the price and the loan balance, usually in cash.
Rules as of October 2026. We checked the fees, deadlines and eligibility rules below against HUD, VA, USDA, Freddie Mac and Fannie Mae documents on October 20, 2026, and linked the main sources.
This guide is for Michigan buyers looking at homes with a low-rate loan already on them, and for sellers deciding whether to advertise one. It is written from Grand Rapids; the federal rules apply statewide.
Why are assumable mortgages worth asking about now?
Because a loan written in 2020 or 2021 can carry a rate well below today’s typical rate on a new 30-year fixed loan, and an assumption is the only way a buyer can keep that rate. On the same balance, a lower rate means a lower monthly payment for as long as the loan lasts.
Most homes for sale do not have an assumable loan, and many that do have too large a gap between price and balance for the buyer to cover. That is why the first question is always which kind of loan the seller has.
Which mortgages can be assumed?
Government-backed loans can; conventional loans mostly cannot.
| Loan type | Assumable? | Who can assume | Most the servicer can charge to process it |
|---|---|---|---|
| FHA | Yes, with servicer approval | A creditworthy buyer who will live in the home (on loans closed on or after December 15, 1989) | $1,800, plus the actual cost of the credit report |
| VA | Yes, with servicer approval (or VA’s, for some servicers) | Any creditworthy buyer, veteran or not | $300 and the credit report cost, plus a regional allowance VA added in 2024 if the assumption closes |
| USDA | Only with USDA approval | A buyer who meets USDA’s income limit and will live in the home | No USDA cap found; ask the servicer. USDA also charges a new guarantee fee on the remaining balance |
| Conventional | Rarely | Mostly some adjustable-rate loans, when the note allows it | Varies |
FHA. Every FHA loan is assumable. On a loan closed on or after December 15, 1989, the buyer has to live in the home and goes through a full manual credit review (HUD waives the review for some family transfers, such as an inheritance or a divorce). In 2024 HUD raised the most a servicer may charge to process an FHA assumption from $900 to $1,800 (FHA INFO 2024-30), and the current HUD Handbook 4000.1 still sets it at $1,800.
VA. A buyer does not need to be a veteran to assume a VA loan. The loan has to be current and the buyer has to be creditworthy by VA standards. The buyer pays a VA funding fee of 0.5 percent of the loan balance unless exempt (VA funding fee table), and on an assumption that fee is paid at closing, not added to the loan.
USDA. A USDA guaranteed loan can be assumed only with USDA’s approval, under 7 CFR 3555.256. The buyer must fall under USDA’s moderate-income limit and occupy the home, the new rate cannot be higher than the original loan’s rate, and a new guarantee fee is charged on the remaining balance. USDA assumptions are underwritten by hand, not through USDA’s automated system.
Conventional. Almost every fixed-rate conventional loan has a due-on-sale clause, and Fannie Mae and Freddie Mac require the servicer to enforce it when the home is sold (Fannie Mae Servicing Guide D1-4.1-05). Some adjustable-rate loans allow an assumption under the terms of the note, and Freddie Mac then requires the buyer to put in at least 5 percent of the price from cash or other equity.
What is the equity gap, and how do you cover it?
The equity gap is the price minus the balance left on the seller’s loan. On a $300,000 Grand Rapids home with a $220,000 FHA balance, the buyer brings $80,000 plus closing costs. On a low-rate loan that is several years old, the gap is usually larger than a normal down payment.
The trade is a lower rate in exchange for more cash at closing. If you have the cash, compare the two monthly payments before you decide: the seller’s balance at the seller’s rate over the years left on the loan, against a new loan for the same amount at today’s rate over 30 years. Our mortgage calculators will run both, or we can run them with you. If you have only enough for a small down payment, a new purchase loan may be the only option that closes.
How the gap can be financed depends on the loan:
- VA: VA does not prohibit a second loan behind the VA loan, under conditions set out in Circular 26-24-17: it must stay in second position, its money can go only to closing costs or to the seller at closing, the buyer gets no cash back, and its payment counts in the buyer’s debt-to-income ratio. The servicer has to go along with it.
- FHA: HUD’s handbook does not spell out a second loan for an assumption gap. Ask the servicer before you count on one.
- USDA: ask the servicer whether any additional financing is possible before you count on it.
How long does a mortgage assumption take?
Longer than a normal purchase, so write it into the offer. VA sets the clearest deadline: a servicer with automatic authority must decide within 45 days of a complete package, and in Circular 26-23-27 VA warned servicers that were refusing packages or missing that deadline. HUD’s handbook sets no comparable processing deadline for FHA assumptions.
In its 2024 report on mortgage problems after a death or divorce, the Consumer Financial Protection Bureau quotes homeowners whose servicers told them to expect 120 to 180 days. Those cases were family transfers, not purchases, but they are a fair warning: a 30-day close is not realistic.
What should a buyer do before making an offer?
- Confirm the loan. Ask the listing agent for the loan type, the servicer, the current balance, the rate and the remaining term. A recent mortgage statement shows all of them.
- Price the gap. Subtract the balance from your offer and add closing costs. That is the cash you need unless a second loan is allowed.
- Compare it with a new loan. Run both payments with real numbers, as described above.
- Write the offer for an assumption. Make it contingent on the assumption being approved, and give the closing date enough room for the servicer’s timeline.
- Call the servicer’s assumption department early. Each servicer has its own package and checklist. Start it the day the offer is accepted.
What should a seller know?
Get released, not just paid. Unless you are formally released, you can stay liable for a loan someone else is paying. On an FHA loan the servicer releases the seller using HUD form 92210.1; confirm the release in writing at closing. On a USDA loan, the federal rule keeps the seller personally liable, so ask the servicer what release, if any, is available.
FHA sellers: check for a partial claim. If you took a HUD partial claim, which was common after COVID forbearance, it becomes due when you no longer own the home, so it has to be paid off at the assumption.
VA sellers: watch your entitlement. If the buyer is not a veteran, or is a veteran who does not substitute their own entitlement, your VA entitlement stays tied to the house until the loan is paid off. That can limit your next VA loan. If the buyer is an eligible veteran who will live in the home and substitutes their entitlement, you get yours back.
Can family members keep a loan without a full assumption?
Often, yes. A federal law, the Garn-St Germain Act, stops a lender from calling a loan due when the home passes to a relative after the borrower’s death, to a spouse or children, to a spouse in a divorce, or into a living trust where the borrower stays the beneficiary. The protection covers homes of one to four units that the borrower lived in, and in the family transfers the relative generally has to live there too, so an inherited rental is not covered. It applies to conventional loans as well. It keeps the loan in place; becoming the borrower on it is a separate step with the servicer.
Where does Priority Home Mortgage fit in?
An assumption is approved by the company that services the seller’s loan, or by the agency behind it, not by a new lender. What we do as a direct lender is the comparison: we run the assumption against a new purchase loan with your real numbers, tell you which one costs less over the time you expect to own the home, and close a new loan if the assumption is the worse deal or the servicer cannot meet your timeline. If you are not sure what to ask the seller’s servicer, we can help with that too.
Frequently asked questions
Can a non-veteran assume a VA loan?
Yes. The buyer has to be creditworthy by VA standards and pays the 0.5 percent funding fee at closing unless exempt. The trade-off falls on the seller, whose VA entitlement stays tied up until the loan is paid off.
Can an investor assume an FHA loan?
No, not on any FHA loan closed since December 15, 1989. Only loans closed before that date can be assumed by an investor, at up to 75 percent of the home’s value.
Does the interest rate change when you assume a loan?
Not on an FHA or VA assumption: you take over the existing rate, balance and remaining term. On a USDA assumption, the terms can be reset, but the rate cannot exceed the original loan’s rate.
Is a conventional loan ever assumable?
Rarely. Most fixed-rate conventional loans must be paid off when the home is sold. Some adjustable-rate loans allow an assumption, and some family transfers are protected by federal law, as above.
This article describes how mortgage assumption rules work in general. It is not legal or tax advice, and it does not decide whether any loan can be assumed; that is decided by the servicer or the agency behind the loan, on a real application. Priority Home Mortgage is an Equal Housing Lender.