This Company Wants to Help Home Buyers Snag 3% Mortgages. Will It Work?

There's a reason so many would-be home buyers are struggling with the market today. Not only are home values elevated, but mortgage rates are the highest they've been in years.

As of early November, the average 30-year mortgage rate was 7.76%, according to Freddie Mac. Compare that to the 3% rates mortgage lenders were offering up in 2020 and 2021, and it's easy to see why today's buyers are downright frustrated and discouraged.

One company, however, is trying to help home buyers today snag 3% mortgages. And that could open the door to more opportunities for buyers and sellers alike.

Breaking an unpleasant cycle

Both buyers and sellers today are stuck in a trap. Buyers can't find affordable properties because borrowing rates are high and inventory is limited.

Sellers, meanwhile, can't easily upsize or move because they don't want to give up the attractive mortgage rates they've locked in on their current loans. And they can't necessarily charge ultra-high prices for their homes to compensate for the higher mortgage rates they'll be looking at for replacement homes because buyers can't afford to pay up when borrowing rates are high.

Roam, a real estate company that launched recently, thinks it has a great solution to this problem. It involves helping sellers transfer their existing mortgages to willing buyers.

Normally, a homeowner can't just sign their mortgage over to a new borrower. But some mortgages fall into the category of assumable loans, which means that it is possible for a seller to transfer their mortgage to someone else.

What Roam is looking to do is connect sellers with assumable loans to buyers who are looking to assume them. That way, everyone wins, in theory.

How do sellers come out ahead in this situation? It's simple. A seller who can sign over their 3% mortgage to a buyer might be in a position to command a much higher sale price for their home. A buyer might be willing to pay that higher price in exchange for a 3% mortgage instead of one close to 8%.

Will this tactic work?

Roam's idea is a good one in theory. The problem, though, is that many mortgages won't qualify to be transferred from one borrower to another.

Mortgage lenders don't tend to like assumable loans because they create more administrative work for less money. To put it another way, a mortgage lender today would rather take the time to write a new $200,000 loan at 7.76% than to deal with the paperwork that allows an existing borrower to transfer a $200,000 loan at 3% to somebody else.

That said, an estimated 22% of active mortgages today are part of loan programs that allow for these transfers, says data firm Black Knight. These include VA loans and FHA loans.

There's also the fact that many homeowners may not realize that their mortgages are assumable. And buyers don't exactly have an easy way to identify loans that fall into this category, either.

That's where Roam comes in. The company plans to identify homes with assumable mortgages, advertise them accordingly, and help with the administrative side of transferring those loans. The company is initially launching in Georgia, Arizona, Colorado, Texas, and Florida.

If you live in one of these states, you may want to be on the lookout for listings that offer the option of assuming an existing mortgage. It could result in a world of savings for you.

Get the best mortgage rate available

Of course, it's too early to say whether Roam will be successful. But it's encouraging to know that buyers today may have the option to get their hands on 3% mortgage rates -- even if they're going about it in a less conventional fashion.

Meanwhile, home buyers who aren't able to take over an existing mortgage can still take steps to snag the most competitive interest rate possible on a new loan. Boosting your credit score, for example, could help you save a bit on a mortgage, as could shopping around and comparing offers. And if you're able to swing the higher monthly payments that come with a 15-year loan, that, too, could lead to a much lower interest rate on your mortgage.