A unique type of mortgage is giving homebuyers a 3% interest rate.

Homebuyers are reminiscing about the lower mortgage rates of 2020 and 2021, which were around 3%, as current rates remain stagnant at 6%. The search for "assumable mortgage" increased in May, following a gradual upward trend that began in 2022.

By assuming an existing mortgage, buyers can potentially secure mortgage rates as low as 2% or 3%, depending on the date of the original mortgage.

Assumable mortgages were widely used to purchase homes in the 1970s and 1980s, but their popularity has waned. The Garn St.-Germain Act of 1982 made it possible for private lenders to enforce a due-on-sale clause, which required payment in full if a property was sold. This made assumable mortgages virtually obsolete, except in cases of divorce or property inheritance.

These mortgages, specifically those backed by the Veterans Affairs, Federal Housing Administration, and United States Department of Agriculture, are still assumed by outside buyers in the U.S. housing market.

"According to Raunaq Singh, Roam founder and CEO, between 20% and 25% of homes on the market will be fully assumable at one time. However, the number of assumption transactions that are taking place is significantly lower than the number of mortgages that can be assumed."

In 2023, the FHA completed 4,052 mortgage assumptions, which is a 59% increase compared to 2021. Meanwhile, the VA saw an even larger jump with 713% more mortgage assumptions in 2023 compared to 2021. Both the VA and FHA are already outpacing last year's assumption totals at more than 5,000 assumptions per department so far in 2024.

Learn about assumable mortgages, their workings, and the challenges they present in the video above.