The VA Home Loan Assumption Process: What You Need to Know
If you're a veteran or active duty military member, chances are you've heard of the VA home loan. The VA home loan is a benefit that helps eligible service members, veterans, and surviving spouses purchase homes with little to no money down and flexible credit requirements.
One of the great features of the VA home loan is that it can be assumed by another eligible borrower. This process is called a VA loan assumption. An assumable mortgage allows the buyer of a home to take over the seller's loan, which can save them a lot of money in the long run.
For veterans and service members who are looking to sell their home, the VA Home Loan Assumption Process is a great option. With this process, the new buyer can take over the loan and avoid the hassle and expense of getting a new loan. Here’s a quick overview of the VA Home Loan Assumption Process and what you need to know.
What You Need to Know About VA Loan Assumption
The first thing you need to know about the VA Home Loan Assumption Process is that it's only available for VA-backed loans. If you have a non-VA loan, you'll need to go through the standard refinance process. The good news is that the VA Home Loan Assumption Process is relatively simple and straightforward.
What is a VA Loan Assumption?
As we mentioned above, a VA loan assumption is when an eligible borrower takes over another borrower's VA loan. The new borrower assumes responsibility for the remaining balance on the loan and agrees to make all future payments.
There are a few reasons why someone might want to assume another borrower's VA loan. Maybe the original borrower wants to sell their home but can't find a buyer who qualifies for a new loan. In this case, the seller can offer their home as an assumable property and find a buyer who can assume their existing loan.
Another reason someone might want to assume a VA loan is because interest rates have gone up since they originally got their loan. By assuming another borrower's lower-rate loan, they can save money on their monthly payments.
The Process of Assuming a VA Loan
If you're interested in assuming someone else's VA loan, there are a few steps you'll need to take. First, you'll need to get in touch with the lender and let them know your intention to assume the loan. The lender will then pull your credit report and verify your income and employment history. Once you've been approved by the lender, you'll need to sign some paperwork agreeing to assume responsibility for the remaining balance on the mortgage as well as making all future payments on time.
Once these steps have been completed, the original borrower will be released from their obligations under the mortgage and will no longer be liable for any missed payments.
It's important to note that not all loans are assumable—you'll need to check with your lender to see if your particular loan has this feature. And even if your loan is assumable, there may be fees associated with assuming someone else's mortgage, so be sure to ask about that as well.
Here's a breakdown of what you need to do to assume a VA home loan:
- Find a qualified buyer. The buyer must be able to provide proof of income, employment, and credit history similar to that of someone who is buying a home with a VA loan.
- Get in touch with the current homeowner and ask if they're interested in doing a loan assumption. If they are, they'll need to contact their lender and request to start the VA loan assumption process. Most lenders have a specific department for this type of transaction. You won’t be able to use your own lender as the lender with the current loan is the lender that performs the VA assumption process.
- Get a credit report from all three major credit reporting agencies (Equifax, Experian, and TransUnion). This will help you determine if the buyer is financially capable of taking over the loan.
- Obtain a release of liability from the VA. This releases you from responsibility for the loan and ensures that the buyer will be solely responsible for making future payments.
- Notify your lender of your intent to sell the home and transfer the loan to the new buyer. Be sure to provide them with all of the required documentation, including proof of release of liability from the VA.
- Work with a real estate agent to list your home and finalize the sale with the buyer. Once everything is finalized, your lender will transfer ownership of the home to the new buyer and they will begin making payments on the loan.
One thing to keep in mind is that assuming a loan typically comes with a funding fee—usually around .5% of the total loan amount. So make sure you factor that into your budget when you're considering taking over someone else's mortgage.
The VA Home Loan Assumption Process: What You Need to Know
Assuming a VA home loan is a great way to get into homeownership without having to go through the entire mortgage process from scratch. If you're interested in assuming someone else's VA Loan, these are the few steps you'll need to take. Be sure to check with your lender beforehand to see if your particular home loan is assumable—not all loans have this feature and not all lenders offer the assumption. Also, keep in mind that there may be fees associated with assuming another person's mortgage. But all in all, assuming a home loan is a great option for veterans and active-duty service members who are looking to purchase a home of their own.
