Before a mortgage loan can be assumed, the following conditions must be met:
First, the loan must be current since delinquent mortgages cannot be assumed.
The mortgage assumption must be pre-approved by the issuing agency (such as the FHA or VA)… and the buyer must agree to assume the entire mortgage obligation.
Furthermore, the buyer must be able to be approved for the mortgage being assumed. For example, if the mortgage to be assumed is an FHA loan, the buyer must qualify for an FHA loan under current mortgage guidelines. This includes meeting minimum standards for credit scores, employment history and money in the bank. It also includes hitting minimum debt-to-income ratios.
Once the assumption is complete, the original mortgage holder is free of their obligation to the home and its loan and the assumptor becomes legally obligated to meet the loan’s terms on an ongoing basis.