San Antonio Express-News (Sunday)
Startup is a map to assumable mortgages
It’s a tough time to buy a house.
While the average rate for a 30-year mortgage has fallen from a peak of 8.45% in October, prospective buyers still face steeper monthly payments compared with two or three years ago. Higher borrowing costs also mean some homeowners who locked in low rates during the COVID-19 pandemic are reluctant to sell because they’re worried about finding a new home they can afford.
That’s made assumable mortgages a hot topic again.
With such mortgages, buyers essentially take over a seller’s loan with its rate rather than getting a new loan. Buyers can save money over the course of these loans, and owners may have an easier time selling their home.
But there are complications. Most conventional mortgages are not assumable, while loans insured or backed by the Federal Housing Administration, the Department of Veterans Affairs or the U.S. Department of Agriculture are eligible if certain requirements are met. There are also additional risks and potential for lost entitlements, Rocket Mortgage warns.
Nevertheless, buyers and sellers may not know that having a buyer assume a seller’s mortgage might be an option. And that prompted Lou Ortiz of San Antonio and Ryan Carrillo of Phoenix to partner this year in launching Assumable, an online platform that lists houses with mortgages eligible to be assumed.
Assumable has roughly
47,000 listings in 2,200 cities, and about 77% of those houses have an annual percentage rate under 4%, according to the company. In the San Antonio area, there are about 1,300 listings.
“We’re excited about it. We think there’s a lot of potential to
make the American dream more affordable for people,” Ortiz said.
Ortiz, an Army veteran who works in sales, and Carrillo, who works in marketing, have agreements with real estate agents, former loan processors and others in the industry. After someone finds a house they are interested in through Assumable, they are connected with those professionals to help guide them through the process and work with a seller’s mortgage company.
Assumable does not take a fee or a percentage if a deal goes through but rather makes its
money through those agreements with agents to essentially generate leads, Ortiz said.
Ortiz declined to share how they source the listings.
Ortiz recently talked to the Express-News about Assumable. The following has been edited for brevity and clarity.
Q: Where did the idea come from?
A:
Ryan was going through the process of trying to find a home, and this was right after rates had started to really kick off. He was having a hard time finding a property that made sense for a price that made
sense. He called me up and was like, “Hey, how much do you know about assumable mortgages? A VA mortgage is assumable, right?”
I’m a veteran and my wife is still in the Army, and I’ve done a lot of research on my own to understand what my options were. We’ve moved around quite a bit, and so we’re constantly going through the process of getting VA mortgages.
We realized that it was difficult to find homes with mortgages that were assumable. It can be difficult for a seller to get the number they want in terms of price, and people feel like they’re wed to their house, given where rates are. On the flip side, it’s difficult for buyers to make the numbers square with what their monthly income and down payment look like. We looked at that and thought, if there’s an opportunity to share with people that these loans are out there, that they can be assumed, it is a better solution for buyers and sellers.
We started with a Google Chrome extension but then went back to the drawing board and built a platform.
Q: What about the complexities involved in these transactions?
A:
At the end of the day, it’s a decision that the consumer is making, both on the buyer and the seller side, in order to try to get the number that they want for their house.
The associated costs can be pretty nominal compared with the savings that occur. It’s like, “Are you willing to trade a few more emails to save hundreds or thousands of dollars per month?” The way that we’ve thought about it is to try to find the best partnerships possible (to make the transaction smoother).
Q: If rates continue declining, how do you expect that to affect demand?
A:
It could definitely be the case that if rates come down precipitously. It would be something that would affect demand. But I think there’s plenty of housing stock that’s sitting on low mortgages. And we’ll probably see more of those come to market, especially as people start to see that there are options where they can reduce the amount of dollars in hand they’re walking away from by doing this sort of transaction.
Over the last 10, 15, 20 years, writers of assumable mortgages haven’t been super jazzed about a second position mortgage. That’s something that we also see changing, especially if the Federal Reserve has to keep rates higher for longer to bring down inflation.