The assumable mortgage Texas buyers ask me about is almost always an FHA, VA, or USDA loan. Those government-backed loans can be assumed, meaning a buyer takes over the seller's existing loan and its terms, if the servicer (and for USDA, Rural Development) approves the buyer. Most conventional fixed-rate loans can't be assumed because of their due-on-sale clause. The catch with any assumption is the equity gap: you still have to cover the difference between the sales price and the loan balance, with cash or approved secondary financing.
I'm Taylor Ring, a Mortgage Loan Officer with Fairway Independent Mortgage Corporation (The Wood Group) in Belton. Assumptions run through the seller's current servicer, not through a new loan from me, but buyers and sellers still ask me how they work and how to compare one against new financing. This guide is built from HUD Handbook 4000.1, VA circulars and regulations, USDA's 7 CFR 3555.256, Fannie Mae's Servicing Guide, and TREC's assumption forms, read October 20, 2026.
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What an Assumption Is
HUD defines an assumption as "the transfer of an existing mortgage obligation from an existing Borrower to the assuming Borrower." You buy the house, and instead of paying off the seller's loan at closing, you take it over: the remaining balance, the remaining term, and the note's interest rate and other terms.
That's why assumptions get attention. If the seller's note has terms you couldn't match on a new loan, keeping them can matter. Whether that's true for you depends on the specific note, so compare it against current new-loan options on paper.
Which Loans Can Be Assumed
| Loan Type | Assumable? | Key Conditions |
|---|---|---|
| FHA | Yes, with servicer approval | Buyer is manually underwritten; for loans closed on or after December 15, 1989, buyer must occupy as a principal residence or HUD-approved secondary residence |
| VA | Yes, with servicer or VA approval | Loan must be current; buyer must be creditworthy and assume full liability; buyer doesn't have to be a veteran |
| USDA Guaranteed | Yes, with Rural Development approval | Buyer must meet USDA eligibility (including income limits); property must meet USDA standards; a new guarantee fee applies |
| Conventional (Fannie Mae) | Generally no | Servicer must enforce the due-on-sale clause unless the transfer is exempt; certain ARMs may be transferable to a creditworthy buyer |
FHA Assumptions
Under HUD Handbook 4000.1:
- Occupancy. If the original FHA loan closed on or after December 15, 1989, the buyer must plan to occupy the home as a principal residence or HUD-approved secondary residence.
- Underwriting. The buyer is underwritten like a new FHA borrower, with some property and appraisal steps skipped. HUD says FHA's automated TOTAL Mortgage Scorecard "must not be used for assumptions," so a Direct Endorsement underwriter manually underwrites the file.
- No minimum cash investment. The buyer "is not required to make a cash investment" and may assume 100% of the outstanding principal balance.
- Fees. The servicer may charge a reasonable and customary processing fee of up to $1,800, plus other allowable charges.
- Seller help. The seller or other interested parties can contribute toward the buyer's actual closing costs within FHA's interested party contribution rules.
- Release of liability. The servicer prepares form HUD-92210.1, Approval of Purchaser and Release of Seller, releasing the original borrower when the buyer signs an agreement to assume and pay the debt.
VA Assumptions
VA Circular 26-23-10 says VA statute and regulations require an assumption to be approved if three things are true: the loan is current, the buyer is contractually obligated to purchase the home and assume full liability, and the buyer is creditworthy under VA's credit standards.
How it works:
- Who decides. Servicers with VA automatic authority must decide within 45 calendar days of a complete application. If the servicer doesn't have that authority, the package goes to VA for prior approval within 35 calendar days. The seller or buyer can appeal a denial to VA within 30 calendar days.
- Underwriting. VA says the documentation is the same as for a VA purchase loan, and the underwriter applies the standards in Chapter 4 of the VA Lenders Handbook.
- Processing fee. Up to $300 when the servicer has automatic authority, or $250 when VA prior approval is required.
- Funding fee. 0.5% of the loan balance, unless the buyer is exempt. VA says it "must be collected at close and may not be financed into the loan balance."
- Other allowable charges include the credit report, recording fees, taxes, insurance and assessments, and title examination and insurance. VA notes the seller may pay real estate commissions.
- The warning on the note. Under 38 C.F.R. 36.4275, VA loans subject to 38 U.S.C. 3714 carry the statement: "THIS LOAN IS NOT ASSUMABLE WITHOUT THE APPROVAL OF THE DEPARTMENT OF VETERANS AFFAIRS OR ITS AUTHORIZED AGENT."
VA Entitlement and Substitution of Entitlement
This is the piece sellers need to understand before they sign. VA describes two kinds of assumptions:
- Without substitution of entitlement: "The original Veteran's entitlement remains encumbered by the loan until the loan is paid in full." The seller doesn't get that entitlement back.
- With substitution of entitlement: if the buyer "is an eligible Veteran who intends to occupy the property as their home and has sufficient entitlement," the buyer can substitute their entitlement for the seller's, and the seller's entitlement is restored.
So a non-veteran can assume a VA loan, but the veteran seller's entitlement stays tied up until that loan is paid off. If you're a veteran seller planning to use your VA benefit again soon, that matters. My VA loan limit in Texas guide explains how entitlement affects your next purchase, and my VA loans page covers the basics.
USDA Assumptions
Under 7 CFR 3555.256, the lender must get Rural Development's approval before a transfer with assumption, and USDA may approve it when:
- The buyer assumes the entire outstanding debt and acquires all the property securing it
- The buyer meets USDA's eligibility requirements, including the income limits
- The property meets USDA's site and dwelling standards, or is brought up to them before the transfer
- Any new rates and terms don't exceed those allowed for new loans, and the interest rate can't exceed the rate on the initial loan
- A new guarantee fee, based on the remaining principal balance, is paid
- The lender submits a written request showing the buyer's creditworthiness, income eligibility, and underwriting
Two details stand out. First, the rule says "the transferor must remain personally liable." Second, a home in an area that's no longer rural can still be assumed. If extra financing is needed to complete the assumption or make repairs, USDA may approve a supplemental guaranteed loan if there's adequate security. My USDA loans page covers the program itself.
Conventional Loans and the Due-on-Sale Clause
Fannie Mae's Servicing Guide says that unless a transfer is exempt (or involves an older "window-period" loan), "the servicer must accelerate the debt." In plain terms, most conventional loans have to be paid off when the home sells.
Fannie Mae does allow certain exceptions:
- Exempt transfers handled without approval, such as a transfer to a surviving joint tenant, to a spouse or child of the borrower who occupies the home, to a spouse under a divorce decree, or into an inter vivos trust where the borrower remains a beneficiary
- Certain adjustable-rate loans that a creditworthy buyer may assume, though not during the fixed-rate period of certain ARM plans or after conversion to a fixed rate
If the seller's loan is conventional, a new loan is the usual path. My conventional loans page explains those options.
Transfers That Don't Trigger Due-on-Sale
All three government programs protect certain family and life-event transfers. Examples from 7 CFR 3555.256(d) and 38 C.F.R. 36.4275 include:
- A transfer where the borrower's spouse or children become joint owners with the borrower
- A transfer to a relative after the borrower's death
- A transfer to a spouse under a divorce decree or legal separation agreement
- A transfer into an inter vivos trust that doesn't transfer occupancy rights
For FHA, HUD lets the servicer process an assumption without a credit review when the transfer is by devise or descent, or in cases like a divorce where the person keeping the home stays in it, if that person shows at least six months of mortgage payments.
If you inherited the home or received it in a divorce, the CFPB says that when you already have title, its rules don't require the lender or servicer to determine your ability to repay before letting you take over the loan. You may need to show proof of your right to the home, such as a will and death certificate or a letter from the executor.
The Equity Gap: The Part Buyers Underestimate
You pay the seller the difference between the sales price and the loan balance you assume, plus closing costs.
Hypothetical example: a home sells for $320,000 and the seller's loan balance is $250,000. The buyer needs $70,000 for the seller's equity, on top of closing costs and the assumption fees.
How buyers close that gap:
- Cash from savings or an acceptable gift
- A second loan. VA Circular 26-24-17 says VA doesn't prohibit secondary borrowing on an assumption. The second loan must be junior to the VA loan, its proceeds can pay allowable closing costs or amounts due the seller, the buyer can't take cash back, and the payment counts in the buyer's debt ratios. VA notes the second loan's rate "may exceed the rate on the VA-guaranteed loan."
- USDA supplemental loan, when Rural Development approves one with adequate security
When the gap is large, an assumption can need more cash than a new low-down-payment loan. That's the comparison I'd want to run with you. My how much house can I afford guide shows how a second payment changes your ratios.
Texas Notes: The TREC Forms
In Texas, assumptions usually ride on two TREC addenda.
Loan Assumption Addendum (TREC 41-3):
- The buyer delivers credit documentation to the seller by a set date. If the seller decides the buyer's credit is unacceptable, the seller may terminate within 7 days, and the earnest money is refunded.
- Within 7 days after the effective date, the seller delivers copies of the note, the deed of trust, and the latest loan statement.
- The buyer may terminate if the noteholder requires an assumption fee over the stated amount (and the seller won't pay the excess), raises the rate above the stated percentage, or otherwise modifies the loan. If the noteholder doesn't consent, either party may terminate.
- Seller's liens: unless the seller is released from liability, a vendor's lien and deed of trust to secure assumption are required.
- Escrow: the seller transfers the escrow account without any deficiency, and the buyer reimburses the seller for it.
- The form warns sellers: "Your liability to pay the notes assumed by Buyer will continue unless you obtain a release of liability from the noteholders."
Addendum for Release of Liability on Assumed Loan and/or Restoration of Seller's VA Entitlement (TREC 12-3): the parties apply for the seller's release and, for VA, restoration of entitlement, and choose whether closing waits for approval. The form says VA won't restore the seller's entitlement unless the buyer is a veteran with sufficient unused entitlement who is otherwise qualified, and that "Seller shall pay the cost of securing the release and restoration."
My earnest money in Texas guide explains how termination rights affect your deposit, and my closing costs in Texas guide covers the rest of your cash to close.
Is an Assumption Right for You?
An assumption may make sense when:
- The seller's note has terms you value and you can cover the equity gap
- You qualify under the program's credit and, for USDA, income rules
- You're a veteran with enough entitlement to substitute, if the seller wants theirs back
A new loan may be simpler when the gap is large, the timeline is tight, or the seller's loan is conventional. I'll lay both side by side so the choice is yours.
Frequently Asked Questions
Are mortgages assumable in Texas?
FHA, VA, and USDA loans can be assumed in Texas if the buyer is approved by the servicer, and for USDA by Rural Development. Most conventional fixed-rate loans cannot be assumed because the due-on-sale clause requires payoff when the home sells, although certain family transfers and some adjustable-rate loans are exceptions.
Can a non-veteran assume a VA loan?
Yes. VA requires an assumption to be approved if the loan is current and the buyer is creditworthy and agrees to assume full liability. However, the veteran seller's entitlement stays tied to the loan until it is paid in full unless an eligible veteran buyer substitutes their own entitlement.
Does the seller stay liable after a loan assumption?
It depends on the program. FHA releases the seller through form HUD-92210.1 when the buyer agrees to assume and pay the debt, and an approved VA assumption includes a release of liability. USDA's rule says the transferor remains personally liable. In Texas, the TREC Release of Liability addendum is used to request a release.
How do you cover the difference between the price and the loan balance?
The buyer pays the seller's equity at closing with cash or approved secondary financing. VA allows a second loan if it is junior to the VA loan, no cash goes back to the buyer, and the payment is counted in the buyer's debt ratios. USDA may approve a supplemental guaranteed loan when there is adequate security.
How long does a VA loan assumption take?
VA says servicers with automatic authority must decide on an assumption within 45 calendar days of receiving a complete application. Servicers without that authority must send the package to VA for prior approval within 35 calendar days. A denial can be appealed to VA within 30 calendar days.
Let's Compare an Assumption With a New Loan
Send me the listing and what you know about the seller's loan, and I'll help you weigh the equity gap and cash needed against a new FHA, VA, USDA, or conventional loan.
Get Pre-Approved | Book a Free Consultation
Related Guides
- FHA Loans
- VA Loans
- USDA Loans
- VA Loan Limit in Texas
- Earnest Money in Texas
- How Much House Can I Afford in Texas?
Sources
- HUD Single Family Housing Policy Handbook 4000.1 (Programs and Products, Assumptions)
- VA Circular 26-23-10, VA Assumption Updates and VA Circular 26-24-17, Secondary Borrowing on Assumption Transactions
- 38 C.F.R. 36.4275
- 7 CFR 3555.256, Transfer and assumptions
- Fannie Mae Servicing Guide D1-4.1-05, D1-4.1-02, and D1-4.2-02
- CFPB: Taking over a mortgage on an inherited home
- TREC Loan Assumption Addendum, form 41-3 and Release of Liability and VA Entitlement Addendum, form 12-3
Taylor Ring, NMLS #2809683 | Fairway Independent Mortgage Corporation, NMLS #2289 | The Wood Group of Fairway, 127 Lake Rd Ste 300, Belton, TX 76513 | Equal Housing Opportunity. This is not a commitment to lend. All loans are subject to credit approval and program guidelines, and approval, rates, and program availability are not guaranteed. Assumption approval is decided by the loan's servicer and, where required, VA or USDA Rural Development. Examples are hypothetical. Not affiliated with or endorsed by HUD, FHA, VA, USDA, Fannie Mae, TREC, or any government agency.