FHA Loan Articles
Can I Assume an FHA Home Loan?Assumption of an FHA loan is a process where the responsibility of the mortgage is acquired by another person through "either Simple or Creditworthiness process." according to FHA.gov.
This means that a new FHA borrower could take over the FHA mortgage from someone else, but in some cases the application and approval process varies depending on when the FHA insured loan was originated.
The FHA "Simple" assumption process, which does not require prior approval from the FHA, is only allowed for FHA loans originated before December 1, 1986.
Loans after that date may also be assumed, but the FHA requires a "creditworthiness assumption process". Simple assumptions may not require FHA approval, but the borrower and lender must work out the details together.
For all loans after the 1986 cut off date, FHA approval and borrower credit verification are required. The "new" FHA rules governing loan assumption requires the borrower to qualify much in the same way he or she would qualify for any other FHA home loan.
A loan assumption credit check is done in the same way as the procedure for any FHA loan application. Loan assumptions can't offer more lenient credit check policies or more stringent ones.
According to the FHA, under the "Determining if an Assumptor is Creditworthy" rule, "The lender who is the holder or servicer of the mortgage determines the creditworthiness of the assumptor, in accordance with standard mortgage credit analysis requirements. The Direct Endorsement (DE) lender may also use an approved authorized agent to process assumptions."
According to the FHA official site, some loans issued between 1986 and 1989 contained clauses or items that cannot be enforced, even when agreed to in writing by both parties. But these clauses were made obsolete by federal law and are not binding.
The FHA states, "Lenders should note that some mortgages executed from 1986 through 1989 contain language that is not enforced, due to later Congressional action. Mortgages from that period are now freely assumable, despite any restrictions stated in the mortgage."