Texas Real Estate Sales Agent ExamFinancingHard
A buyer is considering an assumable loan. Which of the following loan types is generally NOT assumable?
- AConventional loan
- BUSDA loan
- CVA loan
- DFHA loan
Show answer & explanationAnswer & explanation
Correct answer: A. Conventional loan
While some conventional loans may be assumable under very specific circumstances (e.g., certain ARM products), they are generally not designed to be assumable. Most conventional loans contain 'due-on-sale' clauses that require the loan to be paid in full upon transfer of property ownership, making them non-assumable.
Why the other options are wrong
- B. USDA loans are generally assumable, often with lender approval and buyer qualification.
- C. VA loans are generally assumable, even by non-veterans, with lender approval and buyer qualification.
- D. FHA loans are generally assumable, often with lender approval and buyer qualification.
Assumable Loan
A type of mortgage that allows a buyer to take over the seller's existing mortgage, including the remaining balance and interest rate.
- Buyer takes over seller's existing loan terms.
- Often requires lender approval and buyer qualification.
- Common in FHA, VA, and USDA loans; rare in conventional loans due to 'due-on-sale' clause.
Memory trick: Government loans are often a 'go' for assumption, conventional is mostly a 'no'.