Assumable Mortgages in Middle Tennessee: When a Low-Rate Loan Can Be More Valuable Than the House Price

With many homeowners still holding FHA and VA loans in the 2%–4% range, assumable mortgages are getting more attention in Middle Tennessee. The opportunity can be real, but so can the complications.

At Loc8NearMe, we’re speaking with local professionals who know their markets from years of working in them. The idea is to get past generic advice and hear how things actually work on the ground.

For this edition, we spoke with Middle Tennessee Realtor Kimo Quance, Realtor with eXp Realty, TREC 369038, about assumable mortgages and why some buyers and sellers in Middle Tennessee may be overlooking them.

Most homebuyers start with the house itself — price, condition, neighborhood, square footage, school district. But when a seller is still carrying a mortgage at 3% or 4%, the loan attached to the property can materially change how attractive that home looks.

An assumable mortgage allows a qualified buyer to take over the seller’s existing loan balance, interest rate, and remaining term instead of replacing that portion of the purchase with a new mortgage.

In September, Quance searched active listings in Spring Hill and counted 18 homes with assumable mortgages at 4.5% or lower. What surprised him was that most of those listings were not being marketed around the financing.

In a market where new buyers may be borrowing at substantially higher rates, that can mean overlooking one of the most valuable features attached to the property.

One of the first things Quance asks a seller is what kind of mortgage they have.

FHA, VA, and certain USDA loans can be assumed by qualified buyers under the rules of those programs. Conventional mortgages generally cannot because they usually contain due-on-sale provisions.

“If it’s FHA or VA, we may be sitting on the most valuable thing about the house,” Quance says.

For a buyer, an assumption means taking over the remaining balance and interest rate on the seller’s loan. For a seller, that can give the listing an advantage that has nothing to do with fresh paint, new flooring, or another price cut.

A lot of homeowners who bought or refinanced in 2020 and 2021 are still carrying rates that are hard to find on a new loan today.

Quance recently featured a townhouse in Spring Hill listed in the mid-$300,000s with an FHA mortgage he estimated at roughly 3.5%. For a buyer who could handle the rest of the deal, that rate changed the monthly economics of the purchase enough to become part of the reason to consider the property.

This is where two similarly priced houses can stop being financially similar.

But there is an important limitation: the buyer is not assuming the full purchase price.

If a home sells for $400,000 and the seller owes $250,000, the buyer may be able to assume the $250,000 mortgage.

The remaining $150,000 still has to be paid at closing.

That money may come from cash, proceeds from another home sale, a second mortgage, or a combination of those sources.

“The gap is the whole ballgame,” Quance says.

This is often where the deal gets difficult. A 3% mortgage sounds great until the buyer realizes the remaining equity may require a six-figure amount at closing.

If that difference has to be financed separately, the buyer has to look at what the whole arrangement costs, not just the rate on the assumed loan.

An assumption is not an informal handoff of monthly payments.

The buyer applies through the current loan servicer and goes through underwriting. Income, credit, debt-to-income ratio, and the ability to repay are still reviewed.

With VA loans, the buyer does not necessarily have to be a veteran. A qualified civilian can assume the loan if the transaction meets the applicable requirements. FHA loans have their own rules, including occupancy requirements that generally make them a poor fit for investors buying solely to rent.

The buyer keeps the existing rate, but still has to qualify for the loan.

Sellers also have to make sure the assumption is completed properly.

Quance points specifically to the release of liability. If the transaction is not formally approved and documented through the lender or servicer, the original borrower may still be exposed if the new owner later stops paying.

For veteran sellers, VA entitlement can also matter. A non-veteran may be able to assume the loan, but that does not necessarily free up the original borrower’s entitlement for another purchase.

That becomes especially relevant when the seller is planning to buy again soon after closing.

One Columbia, Tennessee, listing shows both why assumptions can be powerful and why they can become frustrating.

The property had been on the market for 158 days with another agent and had not received an offer.

When the sellers came to Quance, he reviewed the mortgage and found an FHA loan at 3% that was assumable.

The sellers did some painting and minor updates, but the biggest change was in how the property was marketed. The low-rate loan became part of the pitch.

Six days later, the house was under contract.

Getting the house under contract took six days. Getting the assumption through underwriting took far longer.

The mortgage was tied to a state housing agency bond program. According to Quance, the servicer was not set up to handle the assumption underwriting itself, so the parties had to find an FHA-approved lender willing to take it on.

That added weeks.

“The assumable loan is the reason the house sold,” Quance says. “The servicer is the reason it’s taking so long. Both halves of that story are true.”

The equity gap is one of the most common problems Quance sees. Buyers may like the interest rate but discover that they do not have enough cash to cover the seller’s equity or cannot finance the difference on terms that still make the transaction attractive.

Underwriting can create another obstacle. The buyer still needs to qualify, and an attractive interest rate does not help if income, credit, or debt obligations prevent approval.

Then there is the servicer.

Some servicers process assumptions regularly. Others do not. Paperwork can move slowly, documents may need to be resubmitted, and a transaction that looks straightforward at the beginning can turn into a long administrative process.

That creates another practical problem: time.

If a seller needs to close quickly, an assumption may simply not fit the transaction.

In Quance’s Middle Tennessee business, he says a typical financed purchase often closes in roughly 30 to 45 days.

For an assumption, he tells buyers and sellers to think more realistically in terms of 60 to 90 days, with the possibility that it takes longer.

His Columbia transaction is an example. The property went binding at the end of July and was still moving through the assumption process in October.

That does not mean every assumption takes that long. But buyers and sellers should understand from the beginning that they are working with the existing loan servicer rather than simply choosing a new lender and starting a conventional mortgage process.

The low rate may be valuable enough to justify the additional time. For other transactions, it may not be.

Assumptions can make particular sense for buyers who have enough cash, or proceeds from the sale of another home, to handle a meaningful equity gap.

They may also work well for buyers planning to stay in the home long enough for the lower monthly payment to matter and who have flexibility around the closing date.

Veterans and active-duty buyers may have additional reasons to look closely at VA assumptions, depending on the circumstances of the existing loan and their own eligibility.

On the other hand, an assumable mortgage may be less practical for someone with minimal cash reserves, a hard closing deadline, or a financing structure that makes covering the equity gap expensive.

The headline interest rate is only one piece of the transaction.

For sellers, Quance’s advice is straightforward: if you have an FHA or VA mortgage with a notably low rate, find out whether it is assumable before putting the home on the market.

That financing may deserve to be part of the listing strategy rather than remaining buried in a mortgage statement.

A buyer comparing two similar homes may view a property very differently when one comes with access to a loan carrying a rate that is no longer readily available in the current market.

“That loan may be worth more to your sale than new countertops,” Quance says.

In Middle Tennessee, sellers naturally spend time thinking about asking price, comparable sales, repairs, renovations, staging, and photography.

But in some transactions, one of the most valuable features of the property will never appear in the listing photos.

It will appear on the mortgage statement.

Mortgage eligibility, assumption rules, fees, underwriting requirements, and individual financial circumstances vary. Buyers and sellers should confirm current requirements directly with the applicable loan servicer and qualified financial or legal professionals before making a decision.

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