If you are shopping for a new home right now, you already know interest rates have skyrocketed to an average of 7.36%. What would you say if we told you that you could get a mortgage for a rate of 3%? There is a way. Investigative reporter Bill Spencer shows us how, with the help from a husband and wife who just used an assumable mortgage to buy a home.
House hunting for their very first home has been anything but easy for Terry and Sarah Diamond.
This couple from the Dallas area toured no less than 10 different homes, but with mortgage rates now hovering around 7% and even higher, they just could’nt find the kind of house they wanted at a price they could afford.
And then, something of a miracle happened.
Suddenly Terry and Sarah found their dream home, with 4 bedrooms, a huge family room, 3 full baths, a huge kitchen and a massive backyard, all sitting on a full acre of land.
Sarah still remembers the day they closed the deal.
“It was incredible. We were out to dinner and we got the call, and I just started crying. Yeah, I was so excited. It was like a thousand pound weight off our backs,” Sarah said.
Yes, the Diamonds are a hard-working family with 2 young children, who never dreamed they could afford a house like this.
Especially right now, when so many Americans just can’t afford these astronomical home mortgage interest rates.
“It’s just ridiculous. The economy has made it where the average, you know, average American can’t afford a house anymore. You can’t buy somewhere to grow your kids up,” Terry said.
That’s when the Diamonds met real estate agent Chasatee Carbaugh with Regal Realtors in North Texas, who found them a beautiful, roughly 6-year-old home in Sanger, Texas with a 3.1% mortgage rate.
When I ask Terry what his friends think of the mortgage rate he was able to get Terry says, they are in disbelief.
“They think I’m lying. They say how did you do that? And, I’m like, an assumable mortgage and they’re like, what is that? They are stunned,” Terry said.
Yes, an assumable mortgage. What is an assumable mortgage?
If you’ve never heard of one you are not alone.
Simply put, an assumable mortgage is where the home buyer takes over the home seller’s mortgage, with the same interest rate. In this case 3.1%. Whatever the seller has already paid-down on the house, becomes the buyer’s down payment. In doing this story, we have seen assumable mortgage rates as low as 2.9% all the way up to 4.5%.
“I mean, you think back to like 2018 and 2019 when real estate was good, even some in the 2021 when there were some popping rates, and I have several clients that had rates of 2.99%, Chasatee Carbaugh said.
So, let’s take a closer look at Terry and Sarah’s assumable mortgage deal.
It works out like this, the house they bought cost $455,000. The woman they bought it from had 63,000 dollars in equity, that she had already paid-down on the home, so the diamonds down payment became $63,000. Now that’s high, about double what the Diamonds expected to pay, but with that 3.1% mortgage rate, their monthly payment became just 2,300 dollars.
With a normal 7% mortgage rate, they would have been paying more than double that amount, about 4,500 dollars a month.
All of which means, Terry and Sarah are saving more than 2,000 dollars a month.
But even more startling is that over the lifetime of their loan Terry and Sarah will be saving over 400,000 dollars.
When Sarah first heard what their monthly mortgage payment was going to be, she couldn’t believe it.
“Absolutely not. No, I didn’t believe it, I just didn’t think it was possible,” Sarah said.
“Yeah, so we were able to get this big house. This big lot. You know, out here in the suburbs and it’s great,” Terry said.
Now it’s important to know, most conventional mortgages can’t be assumed, except in very rare cases. To get an assumable mortgage, it must be a government-backed mortgage, like a V.A., F.H.A. or U.S.D.A loan. And remember, your down payment is likely to be much higher than with a traditional mortgage.
So how can you make that down payment as low as possible?
Chasatee has the answer.
“You can do it. I would look for homes that were possibly built or purchased in maybe the range from 2017, 2018, 2019 to 2021, because the owners don’t have that much equity in it for the buyers to have to assume. That means your down payment only has to cover the small amount of equity they have in that home.
As for Terry and Sarah and their two young children, they’re sitting pretty with a screaming low mortgage rate they can actually afford.
In other words, they were able to buy a home in 2024 with a 2018 mortgage rate.
“Our monthly mortgage, with it being so low, we’re not in a monthly bind. You know, we’re able to fix the flat tire. We’re able to pay the medical bills as they come. We’re able to plan a little vacation. It’s just nice to not feel financially strapped every month,” Sarah said.
RELATED: Web exclusive explains how an assumable mortgage works and what it can mean for you
Need help buying a home in Houston?
If you are a first-time home buyer, there may be help available for you. From grants to assistance with funding - there are some options you might not have thought about for financing a home. And in the Houston area right now, there are a lot more homes out there for you to check out. Bill Spencer found help for first time home buyers in the Houston area.