MortgageCast

A home warranty is a service contract that covers the repair or replacement of major home systems and appliances. It can be beneficial for managing unexpected costs in the first year, especially on an older home. However, read the fine print carefully—they often have coverage limits, exclusions, and service fees. It should be seen as a risk-management tool, not a replacement for a robust personal maintenance savings fund.

The BBB assigns letter-grade ratings (A+ to F) based on factors like the business’s complaint history, transparency, and responsiveness in resolving those complaints. An “Accredited” business has met BBB standards and paid a fee. Check the BBB profile not just for the grade, but for the number and details of filed complaints and how the lender responded.

To qualify, you must meet these criteria:
You are legally liable for the mortgage debt.
You itemize your deductions on Schedule A of your federal tax return (Form 1040).
The mortgage is a “secured debt” on a “qualified home,“ which includes your main home and a second home.
The mortgage was used to buy, build, or substantially improve the home.

The process generally involves these key steps:
1. Contract & Verification: The purchase contract must state the intent to assume the loan. The buyer then contacts the loan servicer to verify the loan is assumable and request an assumption package.
2. Buyer Qualification: The buyer must submit a full mortgage application (credit check, income verification, debt-to-income ratio) to the lender for approval.
3. Lender Approval: The lender underwrites the application. This can take 45-90 days.
4. Funding the Difference: The buyer must pay the difference between the home’s sale price and the remaining loan balance (the equity) in cash, typically via a down payment and closing costs.
5. Closing: The title is transferred, and the buyer formally assumes responsibility for the loan.