FHA Loan Assumption · Arizona

How to assume an FHA loan in Arizona

An FHA loan can be passed from the seller to a buyer along with its interest rate. If the seller has a low rate, the buyer takes over that rate, the remaining balance and the remaining term. Here is who qualifies, what it costs, and what to watch for.

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Eligibility

Who can assume an FHA loan

You must plan to live in the home as your primary residence; investors and second-home buyers cannot assume most FHA loans. The loan servicer reviews your credit and income the way a lender would for a new FHA loan. FHA guidelines generally look for a credit score of 580 or higher and total monthly debts at or under 43% of income, though servicers can set their own standards. You do not need to be a first-time buyer.

The process

The steps

Find a home with an FHA loan

I track active Phoenix-area listings that appear to carry one and verify the loan with the listing agent.

Run the numbers

You pay the difference between the price and the loan balance, in cash, with a second loan, or both.

Write the offer as an assumption

The contract states that the sale depends on the servicer approving the assumption.

Apply with the seller's loan servicer

Expect the same documents as a new FHA loan: income, assets and credit.

Wait for approval

There is no set deadline. Timelines vary widely by servicer, so plan for longer than a standard closing and ask the servicer for an estimate up front.

Close

You take over the payments, and the seller requests a release of liability.

Costs

What it costs

The servicer's processing fee is capped by FHA at $1,800, plus small pass-through costs such as the credit report. There is no new upfront mortgage insurance premium, which a new FHA loan would charge. Standard closing costs apply, and the gap between price and balance is the largest number to plan for.

Mortgage insurance

Mortgage insurance stays with the loan

The loan's monthly mortgage insurance continues on its original terms. On many FHA loans it lasts for the life of the loan, so include it when you compare the assumed payment against a new loan. Even with it, a low assumed rate often comes out ahead; I run that comparison with you.

For sellers

What sellers need to know

Ask the servicer for a release of liability when the assumption closes, so you are no longer responsible for the loan if the buyer stops paying. It is a standard form, but request it explicitly rather than assuming it happens.

Common questions

Does the interest rate change?

No. The rate, balance and remaining term carry over.

Can I use a second loan to cover the gap?

Yes, as long as its payment fits within your qualifying limits alongside the FHA payment.

Can an investor assume an FHA loan?

Generally no. For FHA loans made since December 15, 1989, the buyer must live in the home.

Is an appraisal required?

Often not, since the loan already exists, though your servicer or a second lender may ask for one.

Is Arizona different from other states?

FHA's rules are national. What is local is the supply, and I track the Phoenix-area homes that appear to carry an FHA loan.

General information, not legal, tax or lending advice. FHA rules and fees change; confirm current requirements with the loan servicer.

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Thinking about assuming an FHA loan?

Book a free 30-minute strategy session, or call 480-529-7253. I'll review the loan and tell you what your situation allows.

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