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FHA Loan Answers: Is a Credit Check Required For FHA Loan Assumptions?

April 10, 2013


FHA loans are assumable, which means that if you buy a home with an FHA mortgage and decide to do so later down the line, you could allow someone else to assume the loan–taking over responsibility for the mortgage rather than selling the home outright.

A loan assumption means that the same mortgage you applied for is transferred to a new owner rather than going through a sale of the home, payoff of the original mortgage, and issuing a new loan to the new owner.

Most homes today (except for mortgages closed before December 15 1989) purchased with an FHA home loan require a credit check for the person assuming the loan. There’s no such thing as a simple “hand-to-hand” transfer of an FHA mortgage from one person to another.

A new loan is not required, but a new credit check for the potential new owner is required.

According to FHA loan rules found in HUD 4155.1. Chapter Seven, “Under the HUD Reform Act of 1989, mortgages closed on or after December 15, 1989 require credit qualification of those borrowers wishing to assume the mortgage. The creditworthiness review requirement spans the life of the mortgage. This requirement applies to both those borrowers who

–take title to a property subject to the mortgage without assuming personal liability for the debt, and

–assume and agree to pay the mortgage.”

When it comes to assuming an FHA mortgage for any property with an FHA loan closed on or after December 15 1989, the rules say that such loan assumptions are for owner-occupiers only. Investors are not permitted to assume single-family homes purchased with an FHA loan.

The specific rules in Chapter Seven state: “…private investors are prohibited from assuming insured mortgages that are subject to the restrictions of the 1989 act. This restriction applies whether or not there is a release from liability by the lender of the selling mortgagor.”

For more information on assuming an FHA loan, contact your lender or the FHA directly.

Do you have questions about FHA mortgages? Ask us in the comments section.

Joe Wallace - Staff Writer

By Joe Wallace

Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.

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