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Carrington Promotes the Loan Assumption Process

Carrington Mortgage Services LLC (CMS) is making it easier for customers to take advantage of assumable mortgages, allowing qualified buyers to purchase a home by assuming responsibility for the seller’s loan terms, including the current balance, interest rate, remaining term, and any additional terms of the mortgage.

“Carrington is committed to ensuring borrowers have every possible opportunity to obtain a loan on the home they want,” said Greg Austin, EVP of Mortgage Lending for CMS. “Assumable mortgages are another loan option that Carrington is educating home sellers and buyers about in this very complex real estate market.”

Carrington is engaging with eligible homeowners in their servicing portfolio to let them know that selling their home by allowing a new buyer to assume their low-rate mortgage is a possibility. Carrington’s real estate division is also educating Vylla Agents about the details of the program so they can work with prospective buyers and sellers.

Note that not all types of mortgages are assumable. FHA and VA mortgages can be assumed, while USDA and Conventional ARM mortgages may be assumable, but only under specific conditions. When assuming FHA mortgages specifically, Carrington may offer a simultaneous second lien to the qualifying buyer for an amount up to 80% of the determined property value. In the case of a VA loan being assumed, if the assuming qualified buyer is a non-veteran, the seller’s VA entitlement will remain tied to the assumed property and cannot be used by the veteran to purchase another property until the assumed loan is paid in full.

Sellers who have a mortgage that is eligible for assumption may benefit from advertising the assumable option the mortgage carries, which makes their home more attractive to buyers. This option allows the buyer to assume the seller’s current interest rate, which could be much lower than current market rates, making the home more affordable. Fees are typically lower on assumed mortgages; and there is no appraisal needed. The buyer assuming a loan will need to go through the application and underwriting process to qualify with CMS. CMS will have to approve the full transfer of liability from the seller to the buyer, requiring that the buyer qualify.

Qualifying would include, but is not limited to, credit and income requirements. If the current value of the home is higher than the remaining principal balance (home equity), the buyer will have to cover the difference at closing with cash, or cash and a second mortgage loan, depending on the maximum combined loan-to-value (LTV) ratio determined by CMS. In cases of property transfer or inheritance, where a sale is not initiated, the process for assumption of a mortgage may be simpler.

About Author: Eric C. Peck

Eric C. Peck has 20-plus years’ experience covering the mortgage industry, he most recently served as Editor-in-Chief for The Mortgage Press and National Mortgage Professional Magazine. Peck graduated from the New York Institute of Technology where he received his B.A. in Communication Arts/Media. After graduating, he began his professional career with Videography Magazine before landing in the mortgage space. Peck has edited three published books and has served as Copy Editor for Entrepreneur.com.

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