A 3rd party broker that specializes in mortgages guaranteed by the US government

Assumability Of VA Loans (home loan use)

What is an Assumable Loan?

apply for Assumable LoanA mortgage loan that is assumable allows a new home buyer to inherit the seller’s loan upon the purchase of the home without the terms of the loan obligation being altered.

An example of this would be:

Mr. X sells their home (with assumable loan) to Mrs. Y. After the completion of purchaser, Mrs. Y takes control of the loan payments and consents to the liability of the loan under the mortgage deed.

Assumable loans offer buyers two distinct advantages:

  1. In the event that the loan rate has risen since the seller originally purchased the home, the assumable loan will potentially convey a substantially lower interest rate than a brand new mortgage, this also negates many fees.
  2. With the loan term lowered at the time of sale, a greater amount of monthly payments assumed will be directed at the principal instead of the total interest.

Can you assume a VA loan?

Are homes purchased using a VA home loan eligible to be sold to a buyer who will then assume the VA loan?

Yes. However, there are restrictions.

VA-backed loans are assumable, as long as the person assuming the loan qualifies. This means that the assuming borrower must have: stable income, acceptable assets or reserves, sufficient residual income or DTI of better than 41%, certificate of eligibility and any other standard set forth by the underwriter.

Although previously true, non-VA eligible borrowers cannot assume the VA loan anymore. To be eligible for a VA loan an applicant must have military service time totaling 90 continuous war-time days or 181 peacetime days. Additionally, an honorable discharge is required for veteran applicants.

For more information regarding your eligibility, or if interested in applying for a VA home loan, contact VA Home Loan Centers.