An FHA loan can be taken over by the buyer of the home. HUD's handbook says so in as many words: “all FHA-insured Mortgages are assumable.” For a buyer, that raises two questions: what the servicer will charge for it, and how to pay the difference between the price and the loan. Here is each, from HUD's own rules.
The fee: up to $1,800
The servicer may charge up to $1,800 to process an assumption, plus the actual cost of third-party items such as a credit report and employment verifications. HUD raised the cap from $900 in May 2024, in FHA INFO 2024-30. If the buyer is approved but the assumption fails for reasons beyond their control, half the fee is refunded. The seller may pay toward the buyer's actual closing costs, within FHA's limits on seller contributions.
The equity gap
The buyer takes over the loan balance, not the price. The seller is paid the difference, their equity, at closing. HUD sets no minimum investment from the buyer on an assumption, so there is no down-payment rule to meet; the cash a buyer needs is however much equity the seller has, less anything a second loan covers.
- Cash, the simplest way
- A second loan: HUD's handbook has no rule written for second loans on assumptions, so ask the servicer early whether it will allow one and on what terms
- Seller help with closing costs: allowed within FHA's limits, though it does not reduce the equity owed
How much equity there is depends on the price and on what the seller still owes, so ask the listing agent for the approximate loan balance before you decide what to offer.
Partial claims
A partial claim is money HUD advanced to bring an FHA loan current, secured by a second lien. If the seller's loan has one, it becomes due at the assumption: the servicer obtains an official payoff letter and it is paid at closing, normally out of the seller's equity. Ask about it early; it changes what the seller nets.
Mortgage insurance
The buyer takes over the loan as it stands, including its FHA mortgage insurance. Ask the servicer for the current premium, and whether and when it ends on that particular loan, before you sign a contract.
Who can assume
For any FHA loan closed on or after December 15, 1989, the buyer must live in the home as a principal residence or a HUD-approved second home; only older loans can go to an investor. The buyer is fully underwritten by the servicer, by hand rather than through FHA's automated scorecard, and needs a Social Security number or EIN. Servicers may not put restrictions of their own on assumptions.
How long it takes
HUD's current handbook sets no deadline for the servicer's review. Ask the servicer for its timeline before you agree contract dates, and plan for longer than a purchase with a new loan.
FHA or VA?
The two work alike, with differences that matter. A VA assumption has a 45-day decision deadline, a lower processing cap and a funding fee, and any qualified buyer can assume, veteran or not; an FHA assumption has no deadline in HUD's handbook and requires the buyer to live in the home. Our VA loan assumption guide sets them side by side.
A checklist before the offer
- Ask the listing agent for the approximate loan balance and who services the loan
- Ask the servicer for its assumption package, fee and timeline
- Know how you will pay the seller's equity
- Ask whether the loan carries a partial claim
- Ask about the mortgage insurance on that loan
- Write the contract so the sale depends on the servicer's approval
- In Arizona, expect both spouses to sign on the seller's side
The homes whose listings say their FHA loan can be assumed are on our FHA loan assumption guide, rebuilt every night from the MLS. For how many there are and where, see Assumable Homes in Tucson, by the Numbers.
