VA loans are a great option for many homebuyers, especially military servicemembers, veterans and their families. One little known benefit of VA loans is that they are assumable – meaning the loan can be transferred to a new borrower who takes over the mortgage. This opens up VA home loans to a wider pool of borrowers who may not otherwise qualify.
But not just anyone can assume a VA mortgage There are certain requirements and eligibility criteria borrowers must meet In this comprehensive guide, we’ll break down exactly who is eligible to assume a VA loan.
What is a VA Loan Assumption?
First, let’s define what a VA loan assumption is.
A VA loan assumption allows an eligible borrower to take over the mortgage of a homeowner with an existing VA loan. The borrower inherits the home along with taking over the mortgage payments and terms on the seller’s loan.
This means the assumable VA loan’s interest rate, remaining loan balance, and monthly payments carry over to the new borrower. The buyer does not need to apply and qualify for a new VA mortgage.
VA loans are assumable regardless of interest rate fluctuations in the market Even if rates rise significantly, the assumer gets the lower rate on the existing VA mortgage they are taking over
Assuming a VA loan can save an eligible borrower thousands in closing costs and fees compared to a traditional mortgage. The main fee is a 0.5% VA funding fee on the loan balance.
VA Loan Assumption Eligibility
The key question is – who can assume a VA home loan? Let’s break down the eligibility requirements:
For Military Servicemembers and Veterans
Active duty servicemembers and honorably discharged veterans who meet VA loan entitlement requirements can assume a VA mortgage.
This includes:
- Active duty members of the Army, Navy, Air Force, Marines or Coast Guard
- Members of the Reserves or National Guard called to active duty
- Surviving spouses of servicemembers who died in the line of duty
- Veterans who served minimum duty requirements and were discharged under conditions other than dishonorable
In addition to meeting military service requirements, veteran assumers must have enough unused VA home loan entitlement to cover the mortgage. Entitlement refers to the amount of VA financing you can use, which ranges from $36,000 to $144,000 depending on where you live.
If the veteran has sufficient entitlement, they can substitute it for the seller’s so the seller regains theirs to reuse.
For Non-Veterans and Civilians
Here’s the big surprise – you do not have to be a veteran or military member to assume a VA loan. Civilians and non-military buyers can take over a VA mortgage through assumption.
However, civilian assumers must meet other eligibility criteria:
- Credit – A minimum 580 credit score is usually required, but criteria varies by lender
- Income – Stable income and employment to afford mortgage payments
- Debt-to-income ratio – Total debt compared to income within program limits
- Down payment – Some lenders require one, depends on your qualifications
VA loan assumptions to civilians permanently tie up the seller’s entitlement until the loan is paid off. So veterans are often reluctant to allow assumptions to non-veterans.
How to Qualify for a VA Loan Assumption
As the potential assumer, here are the key steps to take:
- Find a home – Work with a real estate agent to locate VA loan listings open to assumption
- Review loan details – Get the interest rate, balance, monthly payment, term length
- Verify eligibility – Confirm you meet credit, income and other requirements
- Submit documentation – Prove your eligibility with financial documents
- Get approved – Lender reviews and approves your qualification
- Pay fees – At closing, pay 0.5% VA funding fee and any down payment
Qualifying is similar to a normal VA loan, except you must be approved by the specific lender servicing the loan you want to assume. Requirements vary from lender to lender.
The process can take a few weeks to a couple months depending on the lender. Act fast if assuming a VA loan on a home you want to buy.
Pros and Cons of Assumable VA Loans
Assuming a VA mortgage has several benefits for eligible buyers:
Pros
- Lower interest rate than current market rates
- Save big on closing costs and fees
- No down payment required in most cases
- Easier to qualify than conventional loans
- Buyer retains home loan benefits if seller is veteran
Cons
- Limited availability, only works if seller has VA loan
- Seller must approve you assuming their loan
- Can take longer than a normal mortgage
- Ties up veterans entitlement if assumed by civilian
In the right situation with the right property, a VA loan assumption can save you a ton of money compared to alternatives. But it’s not the easiest option, so weigh the pros and cons carefully.
Alternatives to VA Loan Assumptions
What if you don’t qualify to assume a VA loan? Or you simply can’t find a VA mortgage open to assumption? Here are a few options to consider instead:
- VA purchase loan – If you are a veteran, this allows 0% down with limited fees
- FHA loan – Only 3.5% down and lower credit scores accepted
- Conventional 97 – 3% down payment option for first-time buyers
- Down payment assistance programs– Grants, loans and aid for your down payment
These give more flexibility and availability than assumptions if you run into roadblocks.
Finding a Lender to Assume VA Loan
Where do you even start if you want to assume an existing VA mortgage? Here are some ideas:
- Ask your real estate agent to keep an eye out for VA listings open to assumption
- Search for VA and military-friendly lenders in your area
- Look at online mortgage brokers like Veterans United and Navy Federal
- Check bank and credit union websites for VA loan options
Shop around and get quotes from multiple lenders when exploring a VA assumption. Compare interest rates, fees, and eligibility standards.
Go with a lender that specializes in VA loans. They will best guide you through the assumption process.
Key Takeaways – Who Can Assume a VA Mortgage?
- Active duty military and veterans can assume a VA loan if they meet entitlement rules
- Civilians and non-veterans are also eligible to take over a VA mortgage
- Assumers must meet credit score, income, and debt requirements set by the lender
- There are pros and cons to weigh when considering a VA loan assumption
- Work with a VA-approved lender to make the process smooth
At the end of the day, VA loan assumptions open homeownership up to more buyers. Assumable VA mortgages give veterans great flexibility and benefits for their entitlement. And eligible non-veterans can tap into VA loan perks they’d otherwise miss out on.
Just make sure you fully understand the eligibility requirements, risks, and process before pursuing this unique home financing option.
Q: I sold the property I obtained with my prior VA loan on an assumption. Can I get my eligibility restored to use for a new loan?
A: In this case the veterans eligibility can be restored only if the qualified assumer is also an eligible veteran who is willing to substitute his or her available eligibility for that of the original veteran. Otherwise, the original veteran cannot have eligibility restored until the assumer has paid off the VA loan.
Q: How do I get a Certificate of Eligibility?
A: Complete a VA Form 26-1880, Request for a Certificate of Eligibility: You can apply for a Certificate of Eligibility by submitting a completed VA Form 26-1880, Request For A Certificate of Eligibility For Home Loan Benefits, to the Atlanta Eligibility Center, along with proof of military service. In some cases it may be possible for VA to establish eligibility without your proof of service. However, to avoid any possible delays, its best to provide such evidence.
VA Loan Assumption – Advantages, Disadvantages, Rules & Process | Know Your Benefit
FAQ
Is a VA loan assumable by anyone?
Can a non-VA buyer assume a VA loan?
Do you have to be a vet to assume a VA mortgage?