People often come to us asking if they can “take over a loan” or “remove someone from the loan.”
The short answer is that anyone can pay the mortgage on a property in someone else’s name. Lenders don’t care where mortgage money comes from as long as it is applied to the correct loan.
But most people who request this service want to actually alter the underlying loan documents and change the ownership status of the loan.
To do this, you have to be approved for Assumption. You have to submit an Assumption application and the lender has to review and approve.
The Assumption process is similar to the process required to apply for a mortgage.
If you’re trying to take over a loan, the lender wants to ensure that you have enough income to maintain mortgage payments and that you’re serious about taking over the loan. The lender will require full financial information including all income details, tax returns, bank statements, etc. They will pull your credit report and request that you provide information as to why you’re requesting Assumption. If the person being removed from the loan is alive, they will request information and permission from that person about why they are giving up their rights to the loan.
If you’re trying to remove a person from a loan, you will need to demonstrate that their income is no longer required to make the payment each month. You’ll have to show that your financial situation and credit report alone is enough to fully make each payment.
If approved, the lender will enter a new Deed of Trust, meaning they will completely cancel the prior loan and re-record the mortgage in line with the terms of the approved Assumption.
Common circumstances that lead to assumptionDivorce
If you have recently undergone a divorce and the property was awarded to one spouse, the other spouse will remain attached to the mortgage for the duration of the loan. Having a valid divorce decree that awards the property to one spouse doesn’t automatically remove the other spouse from the loan. For some couples, this isn’t a big deal. One spouse resides in the home and continues making mortgage payments with both names attached until the loan is paid off. Other couples want to remove the ex-spouse’s name entirely. Applying for Assumption with a valid divorce decree will require a signed quitclaim deed. Having both a valid divorce decree and a valid quitclaim deed should be enough to receive approval. Sometimes, lenders will require the remaining spouse to demonstrate that she is financially able to maintain payments but, generally, this is rare.
A quitclaim deed is a document transferring interest in the title from one person to another. It has to be signed by the person giving up their interest. It must conform to the county requirements. There may be a cost associated with transferring title, so please reach out to us with further questions about these deeds.Death
When someone attached to a mortgage dies, others close to the original mortgage holder may want to take over mortgage payments in order to stay in the home. There may be limitations on mortgage Assumption options due to probate laws, but generally an interested party can go through the Assumption process following the death of the borrower.Removing a co-signer
Some homeowners take out the original mortgage with a co-signer attached to help make them eligible. As time passes, financial situations improve and homeowners may want to remove the person who originally co-signed. This typically requires a full Assumption application, as the lender wants proof that the co-signer is no longer needed.Adding a borrower
If you want to add someone to an existing loan, this will also have to go through the Assumption process. Be careful doing this because, if approved, that person will be fully attached to the loan. Only attach people you are certain will be present and able to contribute income for the duration of the loan.How long does the process take?
Lenders don’t want to change the terms of original mortgages. That means the process for Assumption is long and time-consuming. Lenders need to be sure you know that changing ownership is a serious decision.
A general timeline for a decision on an Assumption application is between 60 and 90 days from the date your application is deemed complete.
Completing the application is the part that takes the longest. Lenders have many clarifying questions and requests for additional information. They scrutinize your bank statements and pay stubs to make sure they’re clear on every itemized line. Be ready with answers for anything unusual that shows up on your income documents. Answer every question with a signed and dated letter of explanation.How to speed up the process
- Provide a complete application the first time: Work with someone familiar with the Assumption process to help review and gather the documents so the package is considered complete at the outset. The application itself often has many complicated questions. Make sure every question is answered fully and correctly.
- Ask a supervisor about the process: Lenders don’t readily advertise Assumption as an available option because they think Assumptions are risky. Since Assumptions are relatively rare, their process for approving an application is often disorganized. Lenders themselves often don’t know next steps and can’t advise you about how the process works. Escalate these questions up to a supervisor or an actual underwriter.
- Send in updated income information on your own: Lenders need updated bank statements and pay stubs on file for the most recent 30-day period. If you wait until the lender requests updated copies, this will delay your application. Send your updated bank statements and pay stubs as soon as they become available so your application doesn’t stop in the middle of review waiting for these documents.
Oftentimes, borrowers need to both take over an existing loan through Assumption and receive a loan modification because the loan is in default.
This can be done, but the process varies among lenders. Most lenders review both applications at the same time. This is the most logical process: Lenders review to see if a new person can take over the loan through the Assumption process. And, since this review process is similar to the modification review, they also review to ensure that the new person has sufficient income to maintain modified mortgage payments.
If lenders review Assumption and loan modification together, they will typically issue a joint decision, that is, approval to assume and approval to modify. The decision will come together so when they enter the new mortgage, they’re entering the modified terms and the new person’s name.
Other lenders may require the Assumption application to go first followed by the loan modification application.
Tip: Try to get both applications reviewed together. Reviewing them separately doesn’t make sense. If a lender tells you they have to be reviewed separately, try to escalate to a supervisor to see if that’s really true and whether there is any way around submitting separate applications.How does Assumption affect foreclosure?
A lender may agree to put foreclosure on hold if an Assumption application is received and complete. But a foreclosure hold is not guaranteed. You often have to push for it several times or speak directly to your Trustee about it.
“Complete” is the key word that will help get your foreclosure on hold. Simply sending the documents is not enough to halt foreclosure. You have to follow up, ensure the documents are complete and then continue to follow up to make sure nothing becomes outdated.
If the lender marks the system with a question, clarification or needed document request, this is enough to make the file “incomplete.” Never trust any single status update. Instead you should always call for continual, regular and updated responses.What's the biggest obstacle to getting an Assumption application approved?
The difficulty is in getting a response from the lender.
Getting a response on these types of applications require dedication and persistence. Lenders do not want to approve Assumption applications so you’re applying for something that is discouraged from the outset.
With that said, everyone has the right to apply and lenders have procedures for approval. It’s your responsibility (or your representative’s) to move your file to the top of their list and push them to approve.
Keep in mind that this isn’t tailored legal advice. We would love to help you with your specific situation. Please call 1-800-603-3525 right now, or fill out this form for a free consultation with one of our attorneys.