What is an assumable mortgage and when does it help?

An assumable mortgage lets a qualified buyer take over the seller's existing loan – including its rate, balance, and remaining term – instead of getting a new mortgage. When the seller's locked-in rate is far below current rates, assuming it can mean dramatically lower payments. Many government-backed loans (FHA, VA, and USDA) are assumable with lender approval; most conventional loans are not. The catch is the gap: you must cover the difference between the loan balance and the purchase price in cash or a second loan, which can be large if the seller has lots of equity. You'll still go through credit and income qualification, and on a VA loan there can be entitlement issues for the seller. When rates are high, it's worth asking whether the seller's loan is assumable.