💰 What Is an Assumption Fee in Real Estate?

An Assumption Fee is a charge paid when a buyer takes over (or “assumes”) the seller’s existing mortgage. This fee compensates the lender for processing, underwriting, and approving the mortgage transfer. Assumption fees typically apply to FHA, VA, and certain conventional mortgages that allow loan assumptions.

How an Assumption Fee Works

When a mortgage is assumable, a buyer can step into the seller’s existing loan instead of obtaining a new mortgage. The lender must review the buyer’s financial qualifications and formally approve the transfer. The assumption fee covers the lender’s administrative and underwriting work.

Typical lender requirements when charging an assumption fee include:

  • Credit and income verification — similar to standard mortgage approval.
  • Underwriting review — ensuring the buyer qualifies to take over the loan.
  • Document preparation — creating updated loan documents and title work.
  • Loan transfer processing — recording the new borrower with the servicer.

Most assumption fees range from $800 to $1,500, but FHA and VA loans may require additional funding or guarantee fees.

Why an Assumption Fee Matters

Benefits for Buyers:

  • Allows buyers to take advantage of lower interest rates from older loans.
  • Often reduces closing costs compared to a new mortgage.
  • Streamlines financing if the buyer already qualifies.
  • May provide significant savings in high-rate environments.

Benefits for Sellers:

  • Makes the property more attractive to buyers (especially when rates are high).
  • Can help justify a higher purchase price.
  • Speeds up the transaction if the assumption is straightforward.
  • Reduces financing-related contingencies.

Example of an Assumption Fee

Here’s an example of how an assumption fee appears in a real estate transaction:

  • “Buyer shall pay the lender's mortgage assumption fee of $1,200 at closing.”
  • “Buyer agrees to submit financial documentation for lender approval; the assumption fee is non-refundable.”
  • “This sale is contingent on lender acceptance of the buyer for mortgage assumption.”

These examples show how the fee is used when transferring an existing loan from seller to buyer.

Why It Matters for FSBO Sellers

FSBO sellers may receive offers from buyers who want to assume their existing mortgage—especially if the interest rate is significantly lower than current market rates. Understanding assumption fees helps sellers negotiate smarter.

  • Clarifies whether buyer or seller pays the assumption fee.
  • Helps sellers highlight the benefits of an assumable loan.
  • Prevents disputes over lender processing costs.
  • Strengthens negotiation when rates are higher than the seller’s current loan.

When listing with Flat Fee MLS through Brokerless, sellers can attract more buyers by advertising an assumable mortgage.

Frequently Asked Questions

Who typically pays the assumption fee?
The buyer usually pays the assumption fee, but payment can be negotiated as part of the purchase agreement.

How much does an assumption fee cost?
Most assumption fees range from $800 to $1,500, depending on the lender and loan type.

Do FHA and VA loans charge assumption fees?
Yes. FHA loans require a processing fee, and VA loans may require a funding or restoration fee.

Are assumption fees refundable?
Typically, no. Once the lender begins processing the assumption, the fee is non-refundable.