SAN DIEGO (KGTV) — Homebuyers facing high interest rates have a mortgage option that could help them get into their dream home: Assumable loans.

Kyle Hara and his wife have been searching for a house for a few months. The family of four has been renting in Imperial Beach and is looking to upgrade from a two-bedroom to a four-bedroom home, but like many buyers, they've run into interest rate challenges.

"So it's like you see a house and you're like ok it looks like I could afford this. So then once you run the rate, it's like oh wait maybe we've got to look at something cheaper," Hara said.

According to Federal Reserve Economic Data, the average U.S. interest rate for a 30-year fixed mortgage is almost 6.7%, while a 15-year fixed mortgage sits near 6%.

To find a lower rate, some buyers are looking at homes with an assumable mortgage. Mike Blair, team leader of LPT Realty, explains how it works.

"So an assumable loan is basically a buyer can assume a seller's current and existing loan and that means they they're assuming basically the principal balance, the interest rate, and those loan terms," Blair said.

There is a catch — assumable loans must be government-backed, meaning only FHA, VA, or USDA loans qualify.

Buyers also have to account for the gap between the home's sale price and the seller's remaining mortgage balance. For example, if a seller wants to sell their home for $700,000 but their mortgage balance is $500,000, the buyer can assume the mortgage and keep the lower interest rate — but they would need to come up with the remaining $200,000.

Blair outlined the options available to buyers who need to bridge that gap.

"The majority bridge it with cash, and that cash can come from your pocket. It could potentially come from a family member or friend. The other options are you could potentially get a second mortgage. Or if you currently own a house, get a home equity line of credit to cover the gap," Blair said.

While the upfront gap can be significant, Hara said crunching the numbers showed that using the lower interest rate pays off over time.

"It's been amazing because now I can look at other properties that I didn't think I could even look at," Hara said.

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