Going through a separation or divorce can be an incredibly difficult and stressful time. To make matters worse untangling your finances and dealing with properties jointly owned with your former spouse adds another layer of complexity. This process becomes even trickier when a VA home loan is involved.
If you and your spouse are both on the mortgage for a home financed through the VA, you may be wondering what happens to the loan and property after you split. Can one spouse keep the home? Does the loan need to be refinanced? This is where VA loan assumptions come into play.
In this article, we’ll break down everything you need to know about VA loan assumptions, including:
- What is a VA loan assumption?
- When can you assume a VA loan?
- VA loan assumption eligibility
- How to assume a VA mortgage with Mr. Cooper
- What happens if a VA loan assumption is denied
- Alternatives to VA loan assumptions
- Tips for navigating the process with Mr. Cooper
Arm yourself with information before sitting down to discuss next steps regarding your VA home loan. This will help you make informed decisions and successfully assume the mortgage in your name if desired.
What is a VA Loan Assumption?
A VA loan assumption allows an eligible borrower to take over the mortgage payments on an existing VA home loan. Rather than refinancing the loan, the buyer assumes all rights and responsibilities for the loan, including making the monthly payments.
VA loans are assumable under certain conditions thanks to VA guidelines. This sets them apart from conventional loans which typically cannot be assumed by another borrower.
During a separation or divorce when a home was purchased with a VA loan, VA loan assumptions provide a pathway for one spouse to keep the home without refinancing.
For example, let’s say Joe and Sally are divorcing. They purchased their home together 5 years ago using a VA mortgage from Mr. Cooper. As part of the divorce, Sally wants to keep the home.
Rather than Sally having to refinance or qualify for a new loan in her name only, she may be able to assume the existing VA loan. This allows her to take over the loan by meeting the VA’s conditions.
Now, Sally would become solely responsible for making the monthly mortgage payments and adhering to the loan terms. Meanwhile, Joe is released from the loan obligation.
VA loan assumptions provide a convenient way for one spouse to retain a home with an existing VA loan after a divorce. The process is often simpler and less expensive than refinancing.
When Can You Assume a VA Loan?
In order for an eligible borrower to assume a VA mortgage, the following conditions must be met according to VA guidelines:
- The loan being assumed must be a VA home loan – this process does not apply to non-VA loans.
- The person assuming the loan must be approved by the VA and meet all VA eligibility requirements.
- The home securing the mortgage must continue to be the principal residence of the borrower assuming the loan.
- The party being released from the mortgage obligation cannot be forced to pay the VA funding fee again on the assumed loan.
Additionally, VA loans can only be assumed under certain circumstances, such as:
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Divorce – As part of a divorce decree, one spouse may assume the loan as long as they meet VA requirements.
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Death of a joint veteran borrower – If a married couple gets a VA loan together and one spouse passes away, the surviving spouse may be able to assume the loan in their name only.
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Job relocation – If the borrower needs to relocate for a new job, they may be able to have a qualified buyer assume the loan rather than selling.
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Financial hardship – A borrower experiencing financial difficulties may want to deed the home to another qualifying party who can assume the loan.
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Change in marital status – If a borrower gets married after obtaining a mortgage, the new spouse may be added to the loan through assumption.
As long as VA guidelines are satisfied, loan assumptions provide an alternative solution in these types of situations.
VA Loan Assumption Eligibility
Not just anyone can assume an existing VA home loan. Strict criteria must be met to qualify per VA requirements:
Credit – The assuming borrower must have good credit. They will undergo a full credit evaluation by the VA during the assumption process. Minimum credit scores vary by lender but often fall in the range of 620-640.
Income/Employment – Sufficient income to support the mortgage payments will need to be verified. Steady employment history is important to illustrate the financial means to take over the loan.
Residency – For a VA loan assumption, the borrower must intend to use the home as their primary residence. Investment properties don’t qualify.
VA Entitlement – The borrower must have sufficient VA home loan entitlement to assume the loan and take over ownership of the property.
Loan Status – The existing VA loan being assumed cannot be delinquent or in default. It must be current and in good standing to be eligible.
Previous Loan Use – If the borrower previously had a VA loan but sold the home or paid off the mortgage, they must satisfy the VA’s prior loan use requirements before assuming another VA loan.
Funding Fee – Unless exempt, the borrower will be responsible for paying the VA funding fee when the loan is assumed. This is a percentage of the loan amount charged to help offset program costs.
Meeting the VA’s qualifying criteria is crucial for successfully assuming an existing VA home loan from an ex-spouse or other current borrower.
How to Assume a VA Mortgage with Mr. Cooper
Mr. Cooper has extensive experience with VA loan assumptions. If you need to assume a VA mortgage held by Mr. Cooper during separation or divorce, here is an overview of what you can expect:
1. Notify Mr. Cooper – The first step is informing Mr. Cooper that you need to assume the existing VA loan on a home. Provide details on your situation and intent to take over the mortgage.
2. Confirm eligibility – Mr. Cooper will verify you meet the credit, income, residency, and other eligibility standards set by the VA for an assumption. Additional documentation and details may be requested from you during this process.
3. Review terms – The specific loan terms will be reviewed to ensure the loan can be assumed based on the current status and VA requirements. You’ll also review the loan balance, monthly payments, and key dates.
4. Obtain approval – Mr. Cooper will submit the assumption request to the VA for approval. Once granted, the process moves forward. If denied, alternative options would be explored.
5. Sign assumption agreement – You’ll sign a VA Assumption Agreement formally assuming all responsibilities and obligations for the VA loan. This is a written, legally binding contract.
6. Transfer home ownership – A new deed showing you as the sole homeowner will be recorded. At this time, ownership transfers from your spouse also previously on the loan.
7. Make first payment – The first mortgage payment will need to be made by you for the portion of the month following the home ownership transfer. A billing statement will be provided.
8. Release previous borrower – Finally, your ex-spouse or other previous borrower is released from the loan obligation with the VA and Mr. Cooper.
While the process takes some coordination, Mr. Cooper’s knowledgeable loan assumption team will guide you smoothly through each step. Their goal is ensuring a seamless transition and positive outcome.
What if a VA Loan Assumption is Denied?
It’s possible for a VA loan assumption request to be denied if certain criteria is not satisfied. Common reasons for denial include:
- The borrower has insufficient income to support the required payments.
- Credit scores or history don’t meet requirements.
- The loan being assumed is delinquent or in arrears.
- The home will not serve as the borrower’s primary residence.
- Prior VA loan entitlement was not restored.
If you are denied a VA loan assumption, don’t panic. Here are some alternative options to consider:
Appeal – If you believe the denial was based on incorrect information or there were mitigating circumstances, you may appeal the decision with further documentation.
Add co-borrower – Adding a co-borrower like a new spouse to the loan can sometimes overcome shortcomings of a single applicant.
Rent home – Rather than sell, you can rent the home to a tenant and use the rent money to pay the mortgage.
Sell to buyer with new VA loan – The home can be sold to a buyer who obtains a new VA mortgage, providing a clean break.
Refinance – If retaining the home is a priority, you may be able to refinance into a conventional loan or other non-VA mortgage option.
Talk through these alternatives with your Mr. Cooper loan officer if a VA assumption doesn’t pan out. There are always solutions to be found.
Tips for Navigating the Process with Mr. Cooper
Assuming a VA home loan with an ex-spouse on
borrowers in bankruptcy seeking loss mitigation and represented by counsel
Pursuant to federal law, if a borrower is represented by counsel in a bankruptcy proceeding, we are not permitted to discuss loss mitigation options with the borrower directly without written authorization from the attorney. However, the attorney can provide us with written authorization to discuss loss mitigation options with the borrower. The form can be downloaded, completed and returned to us via one of the following methods: Via fax at 972-459-1611 or email at [email protected]. If you are a borrower in West Virginia, we have a form specific to your state. Please download the form and follow the instructions above.
oil and gas requests
If your loan is current and you would like to sell your propertys mineral rights, please submit an Oil and Gas request to us. Please submit all of the following with your request:
- A money order or cashiers check for $250.00 payable to Mr. Cooper. This fee is NOT required if you have an FHA-insured loan, OR if your property is in any of the following states/territories: AZ, CO, GU, IA, KS, MO, NC, NJ, PA, SC, TN, VA and WY. If your Oil and Gas Request is denied, we will refund half this fee ($125.00).
- A complete and recorded copy of the lease agreement, if any.
- An application for Release of Security. Please be sure to complete all of page one. The form is required if you have a Fannie Mae loan, but will help the processing of your application regardless.
- If the agreement you seek requires Mr. Cooper to speak to a 3rd party working on your behalf, please submit a signed statement (including your loan number) authorizing us to do so. This must be submitted prior to processing your request.
- If drilling operations are to take place on your property, please provide a Survey/Drill Site Map that shows the location and distance of the house and of the oil and gas operation.
- A letter from an appraiser that indicates the impact the oil and gas operation will have on the value of the property, and the commonality within the area.
You can email electronic versions of these documents to
If your loan is current, has not had a 30-day late payment in the past 12 months, and meets certain other conditions, you may request a Partial Release. An approved Partial Release enables you to sell a portion of your property (such as undeveloped land) before you have paid off your mortgage. If you would like us to consider a Partial Release for your property, please submit a request along with the following items:
- An Application for Release of Security. If you have a Fannie Mae loan, you can download the application form here. If your loan is not with Fannie Mae, please contact us for information on how to submit this application. Please be sure to fill this out form completely and submit with the other information requested below. Information on this form may require additional investor approval on the Partial Release request.
- A money order or cashiers check for $250.00 payable to Mr. Cooper.
- If the agreement you seek requires Mr. Cooper to speak to a 3rd party working on your behalf, please submit a signed statement (including your loan number) authorizing us to do so. This must be submitted prior to processing your request.
- An appraisal dated in the past six months including the propertys value before and after the proposed partial release, an estimate of the propertys future marketability. (This does not apply to FHA Streamline Refinancings.) The appraisal must also include:
- The legal description of the land to be released under the partial release.
- The legal description of the land that will remain under the lien.
- A complete survey of the land to be released. If this cannot be included in the appraisal, it must be included in a separate survey.
- A complete survey of the land that will remain under the lien, including the surveyors sketch showing the location of the home. If this cannot be included in the appraisal, it must be included in a separate survey.
- A letter explaining the purpose of the partial release, defining the area requested to be released, any expectations of changes in the propertys marketability after the release, and any compensation you expect to receive for the transaction involving the released land.
- The sales contract (if applicable).
You can email electronic versions of these documents to [email protected]. You can also fax them to 972-353-6984 or mail to: Mr. Cooper Attn: Document Administration / Partial Release Request PO BOX 619084 Dallas, TX 75261-9741 Once weve received your information and documents, your request will be reviewed according to investor guidelines. A partial release can only be approved if you have reached a pre-determined combined loan-to-value ratio (CLTV) on your loan. After receiving your partial release request we will inform you if you need to contribute additional funds to reach the required CLTV. Please allow up to thirty business days for processing your Partial Release request. If we approve your request, we will mail documentation to the requesting party for recording with the appropriate county. If you would like us to send it by express mail, please enclose the appropriate mailing/postage documents (with all addresses filled in) with the request package. Incomplete or inaccurate Partial Release Request packages may delay or void the request. If a request is received and does not include all of the required items listed above, we will allow the requesting party thirty (30) days to submit the additional information. If the request still lacks the necessary information after thirty (30) days, the original requested documents will be returned to the requesting party. Your CLTV after the partial release cannot exceed your CLTV before the release. If your CLTV is lower after the partial release, you will be required to apply proceeds of the transaction towards the loans principal until the CLTV is equal to what it was before the partial release. Our value in the property must be secured before processing a partial release request, and any reduction in value cannot exceed the principal payment received.
VA Loan Assumptions Explained | Why are they not closing!?
What is an assumption in a VA loan?
(c) Assumption Types: An assumption involves the transfer of ownership and release of liability of a VA-guaranteed loan. An assumption may be processed with or without a substitution of entitlement. (d) Assumption without a Substitution of Entitlement: The original Veteran’s entitlement
Can a VA loan be assumed if you’re a veteran?
Yes, VA loans can be assumed regardless of whether you’re a Veteran. But there’s risk involved for VA homeowners who allow for assumptions to civilians. Now let’s take a look at some of the challenges of a VA loan assumption.
Should you assume a VA loan with a low interest rate?
For prospective buyers, the ability to assume a VA loan with a low interest rate is a significant benefit when rates are on the rise. But assumptions can also present some risks for the Veteran allowing their loan to be assumed. For prospective buyers, the two biggest benefits of a loan assumption are rooted in cost savings.
Do I need to approve a loan assumption?
The lender and/or the VA needs to approve a loan assumption. Loans serviced by a lender with automatic authority may process assumptions without sending them to a VA Regional Loan Center. For lenders without automatic authority, the loan must be sent to the appropriate VA Regional Loan Center for approval.