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Should I assume the seller's mortgage?
First, get a copy of the seller's mortgage papers. Assuming a seller's mortgage means you're taking over the existing payments instead of getting a new mortgage, so you need to make sure it's even legal in this case. Most lenders don't allow them anymore.
Check the interest rate. It should be lower than the current market rate, and should also be fixed. See how many payments are left. If there are 20 years or more left on the loan, you'll only benefit from assuming the mortgage if one or more of these is true:
- The interest rate is significantly lower.
- You intend to be in the house for several years (5 or more - this will allow you to build enough equity so you can resell at a decent profit).
- Your closing costs on a standard mortgage would be significant and you can.t afford them.
The seller will likely ask for a down payment in order to recover some of the home's equity. If he or she is asking for 15-20% of the selling price, stick with a traditional mortgage. You'll make that much of a down payment on a standard mortgage anyway.
Also, keep in mind that even with an assumed mortgage a lender will check your credit. So if you're considering a mortgage assumption to avoid the credit check, it won't work. The only real benefits of an assumed mortgage are potentially lower interest rates and lower closing costs.