September 23rd, 2013 11:21 AM by BILL WILBANKS
As has been proven to be a huge benefit to home owner's in decades past, the FHA program's assumability will very likely become a big advantage to those home owner's having an FHA mortgage on their home when it comes time to sell. A prospective buyer(s) may prefer to assume your current rate and remaining term versus getting new financing at the then available market rate.
If you believe that the historic mortgage rates today which are still in the mid 4's +/-, even after the recent 100 bp rise this summer, will continue to go up as the market sooner or later seeks whatever the new normal will be as the Feds pull back and private market lenders get back in the game, then current rates would look great wouldn't they if the future market sat at 5.50%, 6%, 6.5% or more? Who knows where they might be 5 to 7 years from now which is when historically move up buyers begin getting the move up bug?
I'd certainly bet you'd be much happier to greatly increase the marketability of your home by at least being able to advertise that it had a 4.5% assumable mortgage. That's not a fair bet. It's a no-brainer really. It's just another usable tool in your tool box folks. This was a huge piece of the market in the late 70's and through the 80"s as many buyers specifically shopped for homes for sale that carried these popular assumable mortgages. Those were the hot listings. Certain years such as 1982 and 83 when rates actually reached 18%, believe it...they did, if it wasn't a house with an assumable mortgage...sales were pretty slow or nonexistent. The last peak I remember was in 1995 when rates hit 9.625% in my memory on the 30 year fixed and Washington started looking for other ways to get more buyers into a home...enter the new waive of the funky products that came forth.
So now you know another advantage of the FHA loan. Even if you never sell or a future buyer simply gets their own financing...you have this sales tool in your pocket. There are more buyers out there that have the means to assume a lower FHA rate when available than you think and anything that helps make it easier to sell at the price you want to sell for later cannot be ignored.