Are VA Loans Assumable?
Unlike other mortgage loans, VA loans can be transferred from person to person. How does a VA loan assumption work? What are the pros and cons for home buyers, sellers, and lenders?
How Does A VA Loan Assumption Work?
What Is A VA Loan Assumption?
A VA loan assumption is when a new buyer uses the VA loan that’s already been established on a property. The new buyer has to be qualified for the mortgage, and in some cases, it might not be possible to assume the existing VA loan. If you are considering taking over an existing VA loan, it’s crucial to understand how this works.
The process of assuming an existing VA loan has nothing to do with refinancing or getting cash out of your house like in some other mortgage products. When you assume an existing VA loan, you’re simply taking over its payment obligations from the person who initially took out the mortgage—and if there are any fees associated with closing on that particular transaction (like appraisal fees), those costs will still be paid by whoever sold their home for them to complete their sale.
It's also important to note that when someone assumes another person's mortgage, they typically make all payments until their own house is sold again; this differs from refinancing because refinancing involves paying off old loans and taking out new ones based on current rates and regulations (and possibly lower rates overall), assuming another person's mortgage involves replacing theirs altogether without changing any terms at all except perhaps increasing interest rates slightly as part of normal market fluctuations over time.
The process for transferring a VA loan is relatively simple: The seller consents for the assumed loan to be taken over by the buyer; then, the buyer needs to provide a down payment (or get a second loan) to cover the gap between the home price and loan balance. The property seller is then prevented from getting another VA loan until the assumed loan is paid in full.
What Are The Pros And Cons For Home Buyers, Sellers, And Lenders?
There are several benefits to a VA loan being assumable. For example, you don’t have to be an active-duty military service member, veteran, or surviving spouse to qualify for VA loan assumption. You may have a lower VA funding fee and fewer closing costs than if you apply for a new loan.
Another big perk for buyers is that they could get a lower interest rate than initially offered when taking out their mortgage with Veterans United Home Loans. This makes sense because lenders will often offer better rates when they know they won't have as much risk involved if something goes wrong down the road—and having someone else's assumable VA loan helps reduce risk by reducing uncertainty about how much risk there is! It also means lenders may be more willing to lend in situations where other lenders might not be ready, which means more potential opportunities available for potential homeowners looking around today!
The Cons for Buyers and Sellers
VA loans are assumable, which means you can sell a home with a VA loan to another person and let them assume the loan. However, there are several things to consider before doing so:
- Lenders are not required to approve the assumption.
- You’ll still need to meet the lender’s credit and income requirements.
- It can be lengthy if the VA loan office must approve the assumption.
- The veteran’s VA entitlement stays with the loan if a civilian assumes it
Buyers and sellers must be careful when moving forward with a VA loan assumption. As a buyer, you’ll want to make sure that you can meet the qualifications. Plus, finding a seller willing to execute a VA assumable loan can be difficult.
Conclusion
There are both benefits and drawbacks to VA loan assumptions. The most significant advantage is that it’s easy for buyers to get into a home they love without putting a lot of money down or taking out a second mortgage. However, depending on how long the seller has lived there, the loan may be difficult for them to pay off before their death or permanent disability leaves them unable to continue making payments on time every month.
Did you know that VA Loans are mortgage loans available exclusively to Veterans and military families? And did you know the benefits the VA Loans offer includes $0 down payments, no private mortgage insurance, relaxed credit requirements, and competitive interest rates?
Learn more about our VA loans here.