Can a VA Home Loan Be Transferred to Another Person? A Comprehensive Guide

For eligible military members, veterans and surviving spouses VA home loans offer an accessible path to homeownership. With perks like no down payment or private mortgage insurance, low interest rates, and lenient refinancing, VA mortgages help service members purchase a home.

If you currently have a VA loan or are interested in assuming someone else’s, you may wonder – can a VA home loan be transferred to another person? The short answer is yes, under certain conditions. Through a process called VA loan assumption, qualified borrowers can take over payments on an existing VA mortgage.

In this comprehensive guide, we’ll explain everything you need to know about transferring VA loans, including:

• What is a VA mortgage assumption?
• Requirements to transfer a VA loan
• How the assumption process works
• Pros and cons of transferring a VA loan
• Special cases like divorce and death

Understanding the ins and outs will help you decide if assuming an existing VA home loan is the right move for your situation

What Exactly is a VA Loan Assumption?

Also called a VA mortgage assumption, this program allows an eligible borrower to assume responsibility for making the remaining loan payments on a VA mortgage The original borrower sells or transfers ownership of the home, but the buyer takes over paying the balance rather than getting a new mortgage

This allows the loan terms like interest rate, payment amount, and payoff date to remain the same. The buyer assumes all obligations of the VA loan, making monthly payments until the principal is paid off.

Requirements to Transfer a VA Home Loan

For a smooth transfer, there are criteria the original borrower, assuming borrower, and mortgage lender must meet:

• The current VA loan cannot be delinquent or in default. Any past due balances must be paid before closing.

• The assuming buyer must meet VA credit standards and income requirements set by the lender. This usually includes:

  • Minimum credit score of 580-620

  • Steady income with debt-to-income ratio around 40% or less

  • Ability to assume all mortgage obligations

• The buyer must pay VA funding fee, typically 0.5% of the loan balance. Veterans with a disability rating and surviving spouses are exempt.

• Fees like loan processing and credit checks must be paid, often $300 or more.

• The lender must approve the buyer and agree to the loan assumption.

As long as these conditions are satisfied, the ownership and payments can legally transfer.

How Does the Assumption Process Work?

For VA loans originated after March 1988, lender approval is mandatory for assumptions. This requires the current homeowner to obtain a Release from Personal Liability to the Government on a Home Loan.

Without this release form, the original borrower remains liable if the assuming buyer misses payments or defaults. The release confirms the buyer assumes full responsibility for the loan.

It’s important to note VA mortgages cannot transfer to a different property. They are approved based on factors specific to that home. Another property may not meet VA requirements, so the loan stays tied to the original house.

Weighing the Pros and Cons of Transferring a VA Loan

There are advantages and disadvantages to weigh when considering assuming an existing VA mortgage:

Potential Benefits

• Buyer need not be a veteran to assume a VA loan

• Locked-in interest rate and terms remain unchanged

• Lower fees than applying for a new mortgage

• Seller can exit the VA loan if their situation has changed

Possible Drawbacks

• Red tape of VA approval if lender requires

• Buyer must meet credit score and income requirements

• Seller remains liable without release from liability form

• Loan can only transfer to same property, not a different house

Carefully considering these pros and cons will help determine if assumption achieves your home buying or selling goals.

Special Cases: Divorce and Death

VA loans can be transferred in certain situations like divorce or death of the original borrower:

Divorce – If the divorce decree specifies the veteran’s ex-spouse will assume the mortgage, this is allowed as long as they were a joint borrower previously. The veteran can seek a release of liability.

Death – When a sole VA borrower dies, the surviving spouse automatically assumes the loan without VA approval needed. If there is no spouse, the estate assumes responsibility for payments.

Surviving Spouse – A surviving spouse who wants to remove themselves from the loan may find an eligible buyer to assume it or just sell the home and repay the VA mortgage.

So in these special circumstances, the VA provides more flexibility to transfer loans.

Finding the Right Lender Partner

Not all lenders readily approve VA loan assumptions, so finding one experienced with transfers is key. Consider asking:

• Do you handle VA assumption requests often?
• What are your specific policies and procedures?
• Is there a fee for processing the assumption?
• How long does approval usually take?

A lender well-versed in VA transfers will guide you through required documentation, fees, and timeline to make the process smooth.

Take the Next Step Toward a VA Home Loan

Whether looking to assume an existing VA mortgage or curious about future options, you’re now equipped with a comprehensive overview of the loan transfer process. Understanding the requirements, pros and cons, and special scenarios will empower you to make the best decision for your situation. If ready to move forward, connect with a VA-approved lender to start the ball rolling. Soon you’ll be on the road to an affordable VA home loan!