Can someone pre qualify and assume an existing loan?
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That depends on the loan that you have on your home. Either, read your mortgage contract or call your lender to see if you have an assumable mortgage. That is the only way to find out.
A loan can only be assumed if the lender permits it. There is usually wording in the original loan contract to say what’s permitted. In any case, the person assuming the loan would have to be approved by the lender.
Completely legal. They fill out the same paperwork you did and you are removed from the loan. If they don’t qualify, you can not proceed.