When your mortgage starts feeling too heavy—whether due to rising payments, job changes, divorce, or other hardships—you may start looking for alternatives to avoid foreclosure. One option that often confuses homeowners is a loan assumption.
A lot of sellers ask us:
“Would it be smarter to let someone assume my loan… or should I just sell the house?”
It’s an important question. Loan assumptions can be powerful in certain situations, but they also come with strict rules, hidden risks, and timelines that don’t always work when you’re falling behind on payments.
This guide breaks it all down so you can understand whether a loan assumption is the best move for you—or whether selling the home may be faster, safer, and more financially protective. Learn more about stopping foreclosure in our blog about how to stop foreclosure.
What Is a Loan Assumption?
A loan assumption is when a buyer takes over your existing mortgage instead of getting a new one.
Unlike a normal sale where the buyer gets new financing, a loan assumption means:
- The interest rate stays the same
- The loan balance stays the same
- The buyer steps into your shoes and takes over payments
This has become especially attractive in California, where many homeowners have ultra-low interest rates from 2020–2022 (sometimes as low as 2.25–3.25%).
With today’s average mortgage rates hovering around 6–7%, buyers LOVE the idea of assuming a 3% mortgage—and that can make your property more desirable.
But here’s the catch: not all loans are assumable, and even when they are, the process is not always smooth.
Which Loans Are Actually Assumable?
FHA Loans
Most FHA loans are assumable, pending full lender approval.
VA Loans
Also assumable—but only if the lender signs off.
Important: If the buyer isn’t VA-eligible, the seller’s VA entitlement may not be restored.
USDA Loans
Assumable with qualification.
Conventional Loans
Not assumable unless they pre-date 1988 or have very rare assumption clauses.
About 60–70% of homeowners in California have conventional loans—meaning most can’t do an assumption at all.
How a Loan Assumption Works (Step-by-Step)
Here’s the simplified version:
- Find a qualified buyer
- Buyer applies with your lender
- Lender checks credit, income, and debt-to-income
- Lender approves or denies the assumption
- Buyer brings in cash to cover your equity
- Buyer takes over your current mortgage payments
The biggest sticking point is Step 5.
The Equity Problem: Why Many Assumptions Fail
Let’s say you owe $420,000 but the home is worth $650,000.
Even if a buyer assumes your low-rate mortgage, they must bring $230,000 in cash to cover your equity.
Most buyers don’t have that kind of money sitting in their account.
This is the #1 reason loan assumptions fall apart in California.
When a Loan Assumption Can Be a Great Option
There are situations where an assumption makes perfect sense for a homeowner:
1. You’re not behind on payments
Most lenders will not approve assumptions if the loan is delinquent.
2. You don’t have much equity
If your home’s value is close to the loan balance, the buyer’s cash requirement is small—and assumptions become easier.
3. You have an FHA, VA, or USDA loan
And you’re still in good standing.
4. You have plenty of time to sell
Assumptions often take 45–120 days, depending on lender responsiveness.
Real Seller Example
We helped a seller in North Hollywood who had an FHA loan at 2.75%. She wasn’t behind on payments yet, but she was about to be. A buyer assumed her loan and only needed to bring $47,000 to closing because she had low equity. The sale took about 70 days, but it saved her credit and prevented foreclosure.
When Selling Is Usually the Better (or Only) Option
Many homeowners simply don’t qualify for an assumption, or it isn’t financially realistic. Selling—either traditionally or to a cash buyer—is often the smarter route.
Here’s when selling makes more sense:
1. You’re already behind on payments
Most lenders freeze the possibility of an assumption if your loan is delinquent.
2. You have high equity
Buyers often can’t cover the cash gap.
In 2024, the average California homeowner had $600,000+ in equity, according to ATTOM Data—making assumptions difficult.
3. You need to move quickly
Assumptions take weeks or months.
Cash sales take 7–14 days.
4. You want certainty
Assumptions have a much higher fall-through rate because:
- Lenders move slowly
- Buyers back out
- Paperwork delays stack up
- Lender conditions become overwhelming
Seller Example
“Anthony” from Palmdale was behind 3 months due to a job layoff. He asked his lender about a loan assumption, but they told him they wouldn’t even review it until he was current. He didn’t have the money to catch up. We purchased his home as-is, stopped the foreclosure timeline, and closed in 10 days. It protected him from a foreclosure filing going on his record.
Loan Assumption vs. Selling: Side-by-Side Comparison
| Factor | Loan Assumption | Selling (Traditional) | Selling (Cash Buyer) |
|---|---|---|---|
| Speed | 45–120+ days | 30–60 days | 7–14 days |
| Buyer Pool | Very limited | Broad | Investors/cash buyers |
| Works If Behind? | Usually no | Sometimes | Yes |
| Repairs Needed? | Yes | Yes | No |
| Guaranteed Closing? | No | No | Yes (cash) |
| Equity Required From Buyer | High | Buyer finances it | Not required |
| Stress Level | High | Medium | Low |
How Foreclosure Affects a Loan Assumption
If you’re facing foreclosure, timing matters.
Pre-Notice of Default (NOD):
Assumption is still possible at this stage, but lenders move slowly, and time may not be on your side. Once the lender begins following the California foreclosure guidelines, the clock starts ticking, and options become more limited.
After NOD is Filed:
Once the Notice of Default requirements in California are met and the NOD is officially recorded, a loan assumption becomes very unlikely. Most lenders freeze assumption activity once the loan is delinquent and the foreclosure process has formally begun.
After Notice of Trustee Sale (NTS):
Assumption is almost impossible.
If you’re anywhere near these timelines, selling—especially to a cash buyer—is almost always faster and safer.
Common Misconceptions About Loan Assumptions
“If I have a VA loan, it will automatically be assumable.”
False. The lender still must approve it.
“Assuming my loan removes all liability for me.”
Not always. Some lenders leave the seller partially liable unless they agree to a full release.
“A buyer just takes over the payment—no underwriting.”
Incorrect. Buyers must qualify just like a normal loan.
“Assumptions are fast.”
Very rare. They’re usually slow.
Should You Sell Instead? Here’s When It’s the Clear Choice
You should seriously consider selling if:
- You’re behind or about to fall behind
- You need to stop foreclosure
- You have repairs you can’t afford
- You want a clean financial break
- You need cash quickly
- You don’t want months of lender back-and-forth
Selling doesn’t mean you failed. It means you’re choosing a strategic exit that protects your credit, equity, and peace of mind.
California Case Study: Assumption Attempt → Fast Sale
A recent seller in Bakersfield, “Linda,” tried to do a loan assumption for nearly three months. Her lender kept “reviewing documents,” then asked for more paperwork, then said they needed another 30 days.
Meanwhile, she was falling deeper behind.
By the time she called us, she was 4 months delinquent and had received a Notice of Default. We purchased her home as-is and closed in 8 days, allowing her to walk away with equity and avoid a foreclosure on her record.
Bottom Line: Is a Loan Assumption Worth It?
A loan assumption can be a great tool—but only for the right homeowner in the right conditions.
If any of these apply to you, selling may be the better choice:
- You have high equity
- You are behind on payments
- You need to move quickly
- Your loan type isn’t assumable
- You don’t want lengthy lender delays
- You prefer certainty and simplicity
If you want a deep dive into options that help you stop foreclosure, check out our main guide here:
How Mrs. Property Solutions Can Help
We’ve helped countless California homeowners navigate mortgage trouble, including those weighing loan assumptions. If selling becomes the easier route, we can:
- Buy your home as-is
- Close in 7–14 days
- Pay off past-due payments
- Stop the foreclosure timeline (depending on sale date)
- Handle all paperwork and liens
- Give you a fair, no-pressure cash offer
We’re here to help you make the right decision for your circumstances—even if that means advising you against selling to us.