Looking for a way to beat today’s higher mortgage rates in Phoenix? If a seller has a low-rate loan from a few years ago, you may be able to take it over and lock in real savings. At the same time, sellers can use an assumable loan to make their listing stand out and attract more qualified buyers.
In this guide, you’ll learn what an assumable mortgage is, which loans in Phoenix are most likely to qualify, the step-by-step process in Maricopa County, the costs and risks on both sides, and when to bring in local pros. Let’s dive in.
What is an assumable mortgage
An assumable mortgage lets you take over the seller’s existing home loan, including the balance, interest rate, and remaining term, if the lender or program approves you. You become the new borrower on that same loan.
This matters when rates rise. If a seller has a lower rate from a few years ago, assuming that loan can cut your monthly payment and reduce total interest paid compared with getting a brand-new mortgage at current rates.
Why assumptions matter in Phoenix now
Phoenix and the broader Maricopa County market have seen rapid price movement and affordability pressure. In this kind of environment, assumable mortgages can help buyers lower payments and help sellers stand out. Offering an assumption can bring more interest, shorten time on market, and even improve terms.
Which loans are commonly assumable
Assumability depends on the actual loan and investor rules. Always check the note and deed of trust, then confirm with the loan servicer.
FHA loans
- FHA loans are generally assumable if the buyer meets FHA and servicer credit and income standards.
- The loan stays FHA-insured after closing.
- FHA mortgage insurance premium usually remains in place and follows FHA rules.
- A seller can seek a formal release of liability once the assumption is approved and closed.
VA loans
- VA loans are typically assumable. A non-veteran may assume if they qualify with the lender and VA guidelines.
- The seller’s VA entitlement can be restored after the VA approves a substitution or issues a release. Until then, some or all entitlement may remain tied up.
- There is no PMI on VA loans, but entitlement rules and possible program fees still matter.
USDA loans
- Many USDA direct and guaranteed loans are assumable with USDA and servicer approval.
- Requirements vary by program, so you should confirm the exact process early.
Conventional loans
- Most modern conventional loans have a due-on-sale clause. They are rarely assumable unless the loan documents explicitly allow it.
- PMI on a conventional loan may not transfer automatically. You must confirm with the servicer and insurance policy.
How the assumption process works in Maricopa County
Plan on 30 to 60 days, though timelines can vary by servicer. Starting early and staying organized helps a lot.
Identify the existing loan
- The seller gathers the loan type, current payoff balance, payment history, and loan servicer contact information. A copy of the note and deed of trust is helpful.
Get prequalified for the assumption
- The buyer completes a prequalification or preapproval with the servicer or lender managing the assumption. Expect a credit check and income verification.
Request the assumption packet
- The seller or agent contacts the servicer to request the assumption packet, fee list, and instructions. This outlines exactly what the servicer needs and how they will underwrite.
Complete underwriting
- The buyer submits documents for review. The servicer confirms that the buyer meets the program’s credit and income standards and whether the seller will receive a release of liability at closing.
Solve for equity
- If the sale price is higher than the loan balance, the buyer must cover the difference in cash or arrange secondary financing. Some sellers consider a carry-back note for part of the equity, if allowed by the servicer.
Title, escrow, and recording
- A title company completes the title search, issues title insurance, and prepares closing documents. Escrow coordinates funds, prorates property taxes, and handles recording with the Maricopa County Recorder.
Close and confirm release of liability
- At closing, the servicer signs off on the assumption. The seller should secure a written release of liability from the servicer. After recording, the servicer updates its records.
Documents you will need
- Assumption application
- Credit report authorization and income docs (pay stubs, tax returns)
- Purchase contract showing price and equity arrangement
- Title insurance commitment or policy
- Seller’s payoff statement and loan payment history
Local escrow and recording notes
- Maricopa County Recorder charges standard recording fees. Your title and escrow team will confirm the current fee schedule.
- Property tax proration is handled in escrow using Maricopa County Assessor records.
- Some servicers take longer to process FHA and VA assumptions. Build timeline flexibility into your contract.
The money side: benefits, costs, and risks
Buyer benefits and costs
Benefits
- Potentially lower monthly payment due to the seller’s lower rate.
- Often fewer new loan origination fees compared with starting a brand-new loan.
- A clear path if you meet the servicer’s underwriting standards.
Costs to plan for
- Assumption and underwriting fees charged by the servicer.
- Possible appraisal or valuation, depending on the program.
- Title insurance, escrow, and Maricopa County recording fees.
- Mortgage insurance that carries over on FHA assumptions.
- Cash for seller equity or a second mortgage if allowed.
Risks
- Some older loans may have unusual terms. Always review the note.
- Refinancing later could involve tradeoffs if loan features differ from market options.
Seller benefits and risks
Benefits
- Your home can stand out in a higher-rate market.
- You may see stronger interest or better terms from motivated buyers.
- A low-rate assumption can help buyers qualify more easily.
Risks and protections
- Without a written release of liability, you could remain legally responsible if the buyer defaults later. Make the release a non-negotiable closing item.
- If you offer seller carry-back financing for equity, have it documented properly and understand the risk.
- Capital gains are based on sale price and cost basis, not the loan type. Consider speaking with a tax professional.
Mortgage insurance and entitlement notes
- FHA MIP typically remains after an assumption. The buyer inherits the MIP schedule.
- VA loans have no PMI, but the seller’s entitlement restoration is critical if they plan to use VA benefits again.
- Conventional PMI may not transfer. Confirm with the servicer and policy terms.
A simple comparison framework
When deciding whether to assume or originate a new loan, compare:
- Monthly payment on the assumed balance and rate
- Monthly payment on a new loan at current market rates for the same purchase price
- Total cash needed at closing, including assumption fees, equity to the seller, title and recording
- Total interest and costs over your expected hold period
When to involve local pros
- Servicer or lender: Engage the servicer as soon as assumption is on the table. Their packet sets the requirements and timeline.
- Title and escrow: Use a Maricopa County title and escrow team to manage title insurance, tax proration, and recording correctly.
- Experienced Phoenix agent: A local agent familiar with assumptions can market the benefit, negotiate the equity solution, and keep documents on track.
- Attorney or tax advisor: Consider for VA entitlement questions, seller carry-back terms, and tax planning.
Common pitfalls to avoid
- Not confirming that the loan is actually assumable in the note and deed
- Delaying contact with the servicer and slowing the timeline
- Overlooking the seller’s release of liability
- Ignoring how FHA MIP, conventional PMI, or VA rules carry over
- Failing to solve the equity gap early
- Skipping a review for unusual loan clauses
- Underestimating title, insurance, or recording needs
Is an assumption right for you
If the seller’s rate is well below today’s market, an assumption could offer you real monthly savings. If you are selling, marketing your low-rate assumption may boost buyer interest and improve your outcome. The key is to verify assumability, align on the equity solution, and stay ahead of the servicer’s process.
If you want help evaluating an assumption or marketing a low-rate loan on your listing, reach out. Our team understands the Phoenix and West Valley market dynamics and knows how to position an assumable mortgage for success. Start with a quick strategy call with Joseph Fear to get a Personalized Market Plan.
FAQs
What is an assumable mortgage in Phoenix
- An assumable mortgage lets a buyer take over the seller’s existing loan, including the balance, interest rate, and term, subject to servicer or program approval.
Which loans can be assumed in Arizona
- FHA, VA, and many USDA loans are typically assumable if the buyer qualifies; most modern conventional loans are not unless the note clearly allows it.
How long does an assumption take in Maricopa County
- Most assumptions take 30 to 60 days, depending on the servicer’s underwriting timeline and escrow, title, and recording steps.
Do I need cash for the seller’s equity on an assumption
- Yes; if the sale price exceeds the loan balance, you must cover the difference in cash or arrange approved secondary financing.
Can a non-veteran assume a VA loan in Phoenix
- Yes, a non-veteran can often assume a VA loan if they meet the lender and VA requirements, but the seller’s VA entitlement restoration must be addressed.
Does an assumption change my property taxes in Phoenix
- No; property taxes are based on ownership and are prorated in escrow, not affected by whether you assume the loan.
How do sellers protect themselves when allowing an assumption
- Require a written release of liability from the servicer at closing and document any seller carry-back terms properly with the closing team.
