When you buy a house, you do so under the assumption that you’ll continue making payments on your mortgage until the end of the loan’s term or you decide to sell the property. Though this is what happens for the majority of homeowners, there may come a time when you need to transfer the mortgage to someone else. But what happens if you’ve financed your home with a VA loan and met all the VA loan requirements set forth by your lender and still need to transfer the loan to someone else?
As a homeowner with a VA mortgage, you may be wondering if you can transfer your loan to another person. The short answer is yes – with VA approval, you can transfer or “assume” your VA home loan to someone else. This can be an intriguing option if you want to move on from your current home but keep your low interest rate locked in.
In this comprehensive guide, we’ll break down everything you need to know about transferring VA loans, including:
- What is a VA loan assumption?
- Who can assume your VA mortgage?
- The process of transferring a VA loan.
- The pros and cons of VA assumptions.
- Special cases like divorce and death.
Let’s dive in!
What Exactly is a VA Loan Assumption?
Also called a “VA mortgage assumption” this process allows an eligible buyer to take over your existing VA loan. They “assume” responsibility for the loan including making the monthly payments and paying property taxes and insurance.
The loan terms – like the interest rate and remaining balance – stay the same The assuming buyer just steps into your shoes on the existing mortgage
VA loans have been assumable since 1944 when the VA home loan program first began It’s a unique benefit not found with conventional mortgages,
Who Can Assume Your VA Mortgage?
The buyer assuming your loan does not have to be a veteran or active military themselves. The VA allows assumptions to both veterans and civilians.
However, the assuming buyer does have to meet certain criteria set by your mortgage lender, such as:
- A minimum credit score (usually 580-620)
- Stable income and modest debt load
- The ability to pay the VA funding fee (0.5% of loan balance)
Your lender will verify the assuming buyer’s creditworthiness, income, and assets to ensure they can manage the loan.
How Does the VA Loan Assumption Process Work?
If you find a qualified buyer for your home, there are a few steps involved with transferring your VA mortgage:
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Find an eligible loan assumer. This is often the trickiest part. The buyer must meet your lender’s credit and income requirements.
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Determine the home’s market value. Get an appraisal to verify the home’s current worth. This ensures the assuming buyer pays a fair price.
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Negotiate the sales price. As the seller, you’ll want to factor in your home equity when negotiating a price with the assuming buyer.
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Submit assumption application. Work with your lender to formally apply for the transfer. You’ll submit paperwork and pay fees.
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Obtain release of liability. This protects you if the assuming buyer later defaults. Not all lenders offer liability releases.
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Close the assumption. The buyer makes their down payment, pays closing costs, and starts making the monthly mortgage payments.
The process takes 30-60 days with a smooth assumption. Complex cases may take longer.
Weighing the Pros and Cons of Transferring a VA Loan
Assuming a VA mortgage has advantages and disadvantages for both the buyer and seller. As the current homeowner, here are some key pros and cons to weigh:
Pros
- Lock in a low rate for the buyer
- Access your home equity without refinancing
- Lower assumption costs than new purchase
- Potentially quick closing time
Cons
- Limitations on future VA loan use
- Continued liability without release
- Lender may prohibit assumptions
- VA or lender approval required
For buyers, the ability to assume a low VA rate can boost affordability. But offering sufficient funds to assume the loan can be a challenge.
Overall, VA assumptions offer a flexible alternative to selling traditionally or refinancing. But they aren’t the right fit for every situation.
Special Cases: Divorce and Death
VA rules allow for special assumption circumstances after a divorce or death:
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Divorce: The VA spouse can assume the loan from the veteran with lender approval. Ex-spouses also may transfer the mortgage to the veteran.
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Death: A surviving spouse can automatically assume the VA loan without lender approval. Otherwise, the estate assumes responsibility for the debt.
These scenarios allow loan assumptions to help with major life transitions.
Is Assumption the Right Move?
Assuming or transferring a VA loan to another buyer is possible, but also complex. Make sure you fully understand the risks and benefits before pursuing an assumption.
I recommend consulting a VA-specialized loan officer or real estate agent. They can provide tailored guidance based on your specific loan situation and goals.
At the end of the day, VA assumptions offer an advantageous opportunity for both sellers and buyers when executed correctly. Taking over another person’s mortgage can make homeownership more affordable during periods of rising rates.
Not All Lenders Allow VA Loan Assumptions
It’s up to the lender to determine whether or not they want to allow VA loan assumptions in the first place. Some are able to process the transfer quickly and easily. However, others refuse to altogether. If you’re considering transferring your mortgage to someone else, the best thing you can do is to speak with your lender. Let them know what’s going on and see if the transfer is even a possibility. If it is, they’ll be able to guide you through the process and let you know what they need to get the ball rolling.
VA Loans Are Transferable
Believe it or not, VA loans are transferable as long as your lender allows what’s called loan assumption. This happens when your lender determines that another person meets the VA loan requirements and could qualify for a loan on their own. If approved, the other person assumes financial responsibility for the mortgage.
The biggest benefit of VA loan assumption is that the person assuming the loan doesn’t have to be a qualified veteran or current service member. As long as the person assuming the loan meets the lender’s financial VA loan requirements, they’ll be approved and able to take over the loan.
Can a VA home loan be transferred to another person?
FAQ
Can a VA loan be signed over to someone else?
Can I transfer my VA loan to my son?
Under what conditions is a VA loan assumable?
Can you give a VA loan to a family member?
Can a VA loan transfer from one person to another?
With low interest rates, no down payment or private mortgage insurance requirements, and streamlined refinancing options, the path to homeownership is easier than ever. Whether you’re a VA loan borrower or someone interested in taking over another person’s VA loan, you may wonder if the mortgage can transfer from one person to another.
Can a person take over a VA loan?
As long as the person assuming the loan meets the lender’s financial VA loan requirements, they’ll be approved and able to take over the loan. It’s up to the lender to determine whether or not they want to allow VA loan assumptions in the first place. Some are able to process the transfer quickly and easily. However, others refuse to altogether.
Can a veteran have two VA loans at the same time?
It’s possible for a VA-eligible borrower to have two VA loans at once. With full entitlement, a veteran has enough VA backing for a loan of $726,200 in most U.S. counties for 2023. Many veterans have some entitlement remaining after using their home loan benefits.
Can I switch a VA mortgage from one home to another?
It is not possible to switch a VA mortgage from one home to another. All home loans are made based on specific factors of the property they are intended to buy. The VA, in particular, has stringent guidelines regarding home inspections, condition and repair.