How to Assume a VA Loan

How to Assume a VA Loan

Veterans Affairs (VA) loans were introduced in 1944 as part of the GI Bill of Rights Act to ease the transition from a life in uniform to civilian life. The advantages of using these are many and include no down payment requirements and lower interest rates.

A VA loan assumption is when a veteran with a VA mortgage has their loan assumed by someone else. You may choose to sell your home if your plans, goals, or needs have changed, but assumable mortgages are another option if you need to get out of a VA loan.

This article will give you an overview of how to assume a VA loan.

What Does It Mean to Assume a Mortgage?

When you assume a mortgage loan, it is essentially the same as a sale-purchase agreement. The seller transfers the terms, interest rates, and mortgage balance remaining from the previous owner to the buyer. When buyers assume the previous owner’s mortgage, they won’t have to take out a new loan to pay for the property.

A VA loan transfer or sale can be done under “certain circumstances,” including assumptions related to VA loans.

According to the VA Lender’s Handbook, VA Pamphlet 26-7, a borrower who sells their property under these circumstances remains responsible to the VA for any loss it may sustain. As a result, if a future default and the subsequent claim are paid, the buyer is a creditworthy purchaser who agrees to pay their share of the payment obligation.

Related Article: What Is VA Homeowners Insurance, and Do You Need It?

Ways to Assume a VA Loan

How to assume a VA loan is generally done in one of two ways: Veterans Use Their Eligibility
Veterans who qualify for VA home loans are willing to accept the seller’s eligibility in exchange for the new buyer’s.

Non-Veteran Assumes the Loan

For the new buyer to qualify for VA mortgage benefits, they must meet specific requirements. When you assume the mortgage in this manner, the original homeowner is no longer in charge of making timely payments, so it is the best way to acquire the mortgage.

How to Assume a VA Loan: The VA Loan Assumption Process

VA loan lenders have differing procedures for assuming loans. However, there are a few common steps:

Check if Your VA Loan Can Be Assumed

Contact the current mortgage lender and determine if the current mortgage holder can assume the VA loan.

Prepare for the Costs of Assuming the Loan

This step includes the down payment, closing costs, and processing fees.

Fill Out an Application

Depending on the lender, the process of applying for a loan may vary a little bit. You will, however, generally need to complete a VA assumption loan form application to apply for the loan.

Please Submit the Required Documents

Personal financial documents will be required so the lender can determine whether you can afford the loan and your creditworthiness. Typically, pay stubs and bank statements will be required.

Close and Sign Liability Release

If your VA loan assumption is approved, you must sign the final document, including the deed of trust and liability release.

Related Article: How Many VA Home Loans Can You Have?

VA Loan Assumption Guidelines

Loan Must Be Current

If you want to assume the VA Loan, you must have a current one. Once this loan is assumed, the loan must be up to date. In addition, the buyer and the VA must meet all income and credit qualifications.

Related:The True Impact Of Divorce On VA Home Loans Every Service Member Needs To Know

The buyer must meet the lender’s defined credit score requirement as part of the qualification requirements, which usually range between 580 and 660. In addition, the buyer must also have a debt-to-income ratio of less than 41%.

Seller Must Pay Funding Fee

You must pay any remaining dues before the closing of the loan. Either the new homeowner or the original homeowner is responsible for paying the closing and funding fee.

Processing Fees

Payment of a processing fee is required in advance to process your application.

Related Article: How Do I Get a Va Certificate of Eligibility?

Who Can Assume a VA Loan

VA loans are approved for veterans, current military personnel, and spouses who qualify for the benefits of serving their country while in the military. As part of the VA loan assumptions, the assuming borrower must be financially qualified for the mortgage, regardless of whether the borrower is a veteran or not.

Benefits to Assuming a VA Loan

The following are the benefits of taking out a VA Loan.

  • The assumption of a VA loan does not have to be limited to active duty military service members, veterans, or surviving spouses.
  • Compared to applying for a new mortgage loan, you’ll have a lower VA funding fee and fewer closing costs with a VA loan.
  • The mortgage rate you receive could be low, especially if the rate you receive today is higher than when the loan originated.

How to Find a VA Assumable Loan

Assumable VA mortgages are easy to find in your area using several simple methods. To estimate what your payments on a VA loan will look like, try out a VA loan assumption calculator.

Through Daily Newspapers

Even though the world has gradually shifted towards digital media, print is still very much alive. There are chances that the sellers have listed assumable mortgages in the local newspaper, so you can check there to see if any are available. I would recommend reaching out to them and finding out more about their conditions if you manage to find one.

Browse the Internet

To locate VA mortgage listings for assumable VA mortgages, you should check out several websites, such as TakeList. The websites provide you with all the information you need, such as the balance amount, interest rate, and the seller’s exchange expectations.

Get Help From a Real Estate Agent

There is also an even easier way to find assumable VA loans. It would help if you first got in touch with a real estate agent who will be able to access the MLS listings and help you find the right home.

Related Article: What is IRRRL? Is This VA Loan Right For You?

Final Thoughts—How to Assume a VA Loan

The assumption of a VA loan is a good option if you are a seller seeking to get out of your mortgage quickly. If you’re looking for home loans with lower interest rates and lower costs, or if you want to buy a new house without having to apply for new loans, you may also want to look into it.

Veterans, active service members, surviving spouses, and civilians may be eligible to assume VA home loans. To prove your creditworthiness, you simply need to meet the requirements for credit and income. Before making a decision, weigh both advantages and disadvantages.

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