Question

The Cunnigham's want to purchase a house by assuming a 6.5 percent FHA insured first mortgage. If the mortgage was funded nine months ago and the current FHA interest rate is 7.0 percent, which of the following statements is CORRECT regarded the existing mortgage? Select one:

a. It is not assumable under any circumstances
b. It is assumable if the rate is adjusted to 7.0 percent
c. It is assumable at 6.5 percent subject to approval of the Cunningham's credit
d. It is assumable at 6.5 percent unconditionally

Answer 1

The existing mortgage is assumable at 6.5 percent subject to approval of the Cunningham's credit.

Step-by-step explanation:

The correct answer is c. It is assumable at 6.5 percent subject to approval of the Cunningham's credit.

An assumable mortgage is a type of loan that allows a buyer to take over the existing mortgage terms and conditions from the seller. In this case, the Cunningham's can assume the FHA insured first mortgage at the original interest rate of 6.5 percent. However, their creditworthiness needs to be approved by the lender before the assumption can take place.

It is important to note that not all mortgages are assumable, and even if they are, the lender may have certain requirements and conditions for the assumption to be approved.