When is a mortgage assumption typically allowed?

A mortgage assumption is typically allowed when the buyer agrees to take over the seller's existing mortgage under the original terms and conditions. This process enables the buyer to step into the seller's position, effectively taking on the existing debt associated with the property while usually maintaining the same interest rate and remaining balance. This can be advantageous for the buyer, especially if the terms of the original mortgage are more favorable than current market rates.

In most real estate transactions where mortgage assumptions occur, it is essential for the lender to be involved and to approve the assumption to ensure that the buyer meets their creditworthiness requirements. However, in scenarios without explicit lender permission, such assumptions may still take place under certain conditions, depending on the type of mortgage (for example, some FHA and VA loans allow for less restrictive assumptions).

The other choices do not accurately reflect the conditions under which a mortgage assumption takes place. Selling for cash only does not involve the mortgage being assumed, while having no credit history could present risks that make lenders hesitant to approve an assumption. Lastly, if the seller defaults on payments, this typically complicates the situation further rather than facilitating a straightforward assumption process.