203b Loan Assumability
One of the largest benefits for FHA 203(b) loan borrowers is the fact that, in most cases, FHA loans are fully assumable. This means that a new borrower can take over the loan at any time, as long as they have the lender’s approval. According to HUD, for all FHA loans closed after December 1989, “the assuming Borrower may assume the Mortgage as a Principal Residence, HUD-approved Secondary Residence or Investment Property.” So, in some ways, 203b loan assumption requirements are actually more liberal than the requirements for getting an initial 203(b) loan.
FHA Loan Assumptions and Down Payments
If a new borrower wants to assume a FHA mortgage, they are not required to make a down payment. Instead, they simply need to “assume 100% of the outstanding principal balance of the Mortgage, subject to the restrictions on LTV ratio for Investment Properties and HUD-approved Secondary Residences.”
The FHA Loan Assumption Process
In order for a FHA loan assumption to take place, the home seller will need to prepare a HUD form 92210.1, Approval of Purchaser and Release of Seller. If you’re seriously considering selling your home via loan assumption, you should check with your lender to learn more details about lender regulations, state laws, or other elements that could impact your ability to have your FHA loan assumed by a new borrower.