A man tears a sheet of paper with "7%" in half.
Illustration by Lanette Behiry/Real Estate News

A startup wants to cut mortgage rates in half for new buyers 

Roam, launched this week by a former Opendoor employee, aims to help buyers through the complicated and time-consuming mortgage assumption process.

September 14, 2023
3 minutes

Key points:

  • The company hopes to make assumable mortgages more mainstream by doing the legwork on behalf of buyers and sellers.
  • Because most current homeowners have mortgage rates well below existing rates, some buyers could effectively cut their rate in half.
  • The startup is being funded in part by Opendoor founder Eric Wu.

Buy a home today at pandemic-era rates? That's what a new startup is aiming to help buyers do.

Roam, which just launched this week, wants to make the process of assuming an existing mortgage much easier for buyers and sellers. The company is seeking to carve out a niche in the complex — and volatile — mortgage industry. According to the Wall Street Journal, which broke the news on the company's launch, the startup has close ties to Opendoor. Roam was founded by a former Opendoor employee, and Opendoor Founder Eric Wu is one of the investors helping to launch the project.

So how does it work? Raunaq Singh, Roam founder and CEO, said the company will handle much of the paperwork and constant follow-ups needed to complete the mortgage assumption process. Or in other words, Roam will call "someone every day" until they get what they need from servicers. 

It's somewhat of a brute force method in an industry that functions on closing new loans, not altering existing ones.

The appeal of assuming an existing mortgage is obvious: New buyers would be locked into the seller's existing mortgage rate — which is likely to be dramatically lower than today's 7% interest rates since nearly 80% of mortgaged homeowners have a rate under 5%, according to Zillow. And elevated rates don't appear to be going away anytime soon. As a result, buyers' monthly payments would be significantly lower. 

The process of assuming a mortgage can be tricky, however. First, and most importantly, is determining whether a loan can be assumed. Only certain types of loans, such as FHA or VA loans, will qualify. 

And then there's the potential home equity gap. If a buyer agrees to purchase a home for significantly more than is owed on the home, they will have to come up with enough cash to bridge the gap in order to close.

Assuming a mortgage can also take a lot more time. And in some cases, a seller may not see the value in going through the process, North Carolina-based agent Marshall Pickett told Real Estate News back in June.

"They may want to wait 60 days for an extra 15 grand," he explained. "Or they may think they're gonna be in multiple offers and still get 15 grand more."

But if sellers are willing, it could improve affordability for buyers struggling to make the math work on their home purchase.

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