Buyer guide
Assumable mortgages in Michigan
Short answer
An assumable mortgage lets you take over the seller's existing loan and their interest rate. Only government-backed loans qualify — FHA, VA and USDA — and the appeal is obvious when the seller holds a sub-4% rate and the market sits near 6.5%. The catch is the equity gap: you still pay the seller for the difference between their loan balance and the price, usually in cash or a second mortgage at today's higher rate.
Which loans can be assumed
Assumability is a feature of government-backed loans. FHA, VA and USDA loans can be taken over by a qualified buyer; conventional loans almost never can, because their due-on-sale clause lets the lender call the balance when the home changes hands.
You do not get the rate for free. The servicer still underwrites you — credit, income and debts — much like a new loan, and USDA adds its income cap. Assumption is a way to inherit a rate, not to skip qualifying.
The equity gap — the part that surprises buyers
You assume the seller's remaining balance, not the purchase price. The difference — their equity — is yours to cover. On a home that has appreciated, that gap can run 20% of the price or far more.
Buyers usually bridge it with cash or a second mortgage at today's rates. That second loan is small next to a full mortgage, but its higher rate eats into the savings the low first rate created — so run both loans together before assuming the deal is a win.
What it costs and how long it takes
Assumption is not free or fast. Servicers charge a fee — FHA caps it around $1,800, VA runs a 0.5% funding fee on the balance, USDA a few hundred dollars — and processing can drag for weeks because assumption desks are understaffed.
Build that timeline into your offer. A seller with a competing all-cash or conventional buyer may not wait out a slow assumption, so a pre-qualification from the servicer strengthens your position.
If you are the seller: get released from liability
The assumption is not clean until the lender formally releases you. Without a release of liability, you can stay on the hook if the buyer later defaults — even though you no longer own the home.
For a VA loan there is a second issue: a non-veteran buyer ties up your VA entitlement until the loan is paid off. Selling to another veteran who substitutes their entitlement frees yours; selling to a civilian may not.
Frequently asked questions
How do I find an assumable mortgage in Michigan?
Listings rarely flag it, so ask the listing agent whether the seller's loan is FHA, VA or USDA and what the rate and balance are. Michigan's large veteran population means VA-backed, assumable loans are more common here than in many states.
Does assuming a mortgage need a new appraisal?
The servicer often skips a full appraisal because it is not making a new loan — but you should still learn the home's value, because that is what sets the size of the equity gap you have to fund.