Are VA Loans Assumable? How VA Assumptions Work?

If you’re buying or selling a home, you’ve probably heard about VA loans and their great benefits. But did you know that VA loans are assumable? This means a buyer can take over the seller’s existing VA loan, keeping the same low interest rate and loan terms, which is a huge advantage in today’s market.

For buyers, this could mean lower monthly payments compared to getting a new mortgage. For sellers, offering an assumable loan can make their home more attractive to potential buyers.

By the end of this guide, you’ll understand how VA loan assumptions work, who qualifies, and whether it’s the right move for you.

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Key Takeaways 

VA loans are assumable; as a qualified buyer, you can take over the seller’s loan, including the interest rate and remaining balance.

Buyers can benefit from lower interest rates if the seller’s rate is lower than current market rates, reducing monthly mortgage payments.

VA loan assumptions often come with lower closing costs compared to getting a new loan, making homeownership more affordable.

Both veterans and non-veterans can assume a VA loan, but non-veterans may need to meet stricter financial requirements.

Lender and VA approval are required for a loan assumption, ensuring the new borrower meets credit and income standards.

The assumption process is often faster than applying for a new mortgage, making it a quicker path to homeownership.

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What Is a VA Loan?

A VA loan is a government-backed mortgage program designed to help veterans, active-duty service members, and eligible surviving spouses buy a home with great benefits. 

It’s designed to make homeownership more accessible by offering low interest rates, no down payment, and no private mortgage insurance (PMI). The U.S. Department of Veterans Affairs (VA) guarantees the loan, reducing the risk for lenders and making home financing more affordable for veterans.

What Is a VA Loan Assumption?

A VA loan assumption allows a new buyer to take over an existing VA loan from the original borrower. 

Instead of applying for a new loan, the buyer simply assumes the seller’s loan balance, interest rate, and repayment terms. This can be a major advantage, especially if the original loan has a lower interest rate than current market rates.

Key Features of VA Loan Assumptions

1. Assumable Loan

VA loans are one of the few mortgage types that are assumable, which means a qualified buyer can take over the loan without starting a new mortgage.

2. Lower Interest Rate

The buyer assumes the seller’s interest rate, which may be lower than current mortgage rates, potentially saving thousands over the life of the loan.

3. VA Loan Entitlement

The seller’s VA entitlement may remain tied to the loan until it is paid off unless the buyer is an eligible veteran willing to substitute their own entitlement.

Are VA Loans Assumable?

Yes, VA loans are assumable, making them a unique option compared to most other mortgage types. A qualified buyer can take over the existing VA loan, including its remaining loan balance, interest rate, and monthly payments, rather than applying for a new loan.

Many conventional and FHA loans require lender approval for assumptions, and some have restrictions that make the process difficult. 

However, VA assumable loans stand out because they allow buyers to benefit from the original loan terms, potentially offering significant savings.

Why VA Loans Are Assumable?

Here are a few reasons why VA loans are assumable: 

1. Lower Interest Rates

If the original VA loan has a lower interest rate than current market conditions, the buyer can assume the loan and save money on monthly mortgage payments.

2. Reduced Closing Costs

Compared to applying for a new VA loan, the assumption process usually comes with lower closing costs, saving buyers thousands of dollars.

3. Faster Process

Since the buyer is taking over an existing VA loan, there’s typically less paperwork, making the assumption process faster than securing a new mortgage.

Who is Eligible to Assume a VA Loan?

If you're considering assuming a VA loan, there are a few key requirements to keep in mind. While VA loans are designed for veterans, both veterans and non-veterans can assume one as long as they meet the lender’s approval criteria.

Qualification Requirements for Assuming a VA Loan

1. Veterans and Non-Veterans

Veterans, active-duty service members, and certain surviving spouses can assume a VA loan with full entitlement benefits. 

Non-veterans can also assume a VA assumable loan, but they may need to meet additional financial requirements.

2. Credit Score

Most lenders require the new borrower to have a good credit history. While exact credit requirements vary, a score of 620 or higher is typically recommended.

3. Debt-to-Income Ratio (DTI)

Lenders will evaluate your debt-to-income ratio to ensure you can comfortably manage the monthly payment. A lower debt-to-income increases your chances of approval.

4. VA and Lender Approval

Both the VA and the original lender must approve the loan assumption. The lender will review the qualified buyer’s financial situation before granting approval.

Should You Assume a VA Loan?

If you’re looking for a way to secure a low-interest mortgage with lower upfront costs, assuming a VA loan might be a great option, provided you meet the eligibility requirements.

Steps to Assume a VA Loan

Step 1: Find a VA Loan to Assume

Start by searching for sellers with assumable VA loans. You can find these through real estate listings, VA loan assumption marketplaces, or by working with a real estate agent familiar with VA loan assumptions.

Step 2: Get Pre-Approved

Before moving forward, make sure you meet the lender’s credit score and debt-to-income ratio requirements. While VA loans are flexible, lenders still need to verify that you can handle the monthly mortgage payments.

Step 3: Submit the Assumption Application

Once you’ve found a VA loan to assume, you’ll need to apply with the lender. This involves completing paperwork and providing financial documents, such as proof of income and credit history.

Step 4: Pay the Fees

VA loan assumptions come with some costs, including appraisal fees, loan assumption fees, and potentially a VA funding fee (if the buyer is not a veteran). Be prepared for these expenses before moving forward.

Step 5: Close the Deal

After lender and VA approval, you’ll finalize the loan assumption by signing the necessary documents. Once the process is complete, you officially take over the remaining loan balance and its existing terms.

Frequently Asked Questions

Can civilians assume a VA loan?

Yes, civilians can assume a VA loan, but they typically need to meet stricter credit and income requirements than veterans.

Can an ex-partner assume a VA loan?

Yes, an ex-spouse may assume the loan if they meet the lender’s requirements and are approved for the loan assumption process.

How old do you need to be to assume a VA loan?

You must be at least 18 years old, as this is the legal age to enter into a mortgage agreement.

Is entitlement always forfeited with a VA loan assumption?

Not necessarily. If the buyer is a qualified veteran and substitutes their VA entitlement, the seller may regain their entitlement. Otherwise, the seller’s entitlement remains tied up until the loan is repaid.

How long does it take to assume a VA loan?

The VA loan assumption process typically takes 30 to 60 days, depending on lender approval and paperwork processing times.

Conclusion 

Assuming a VA loan can be a great way to secure a lower interest rate and reduce upfront costs, making homeownership more affordable. For sellers, it’s a great way to attract buyers looking for better financing options.

If you're considering a VA loan assumption, having the right guidance can make all the difference. Truss Financial Group can help! Contact us today to explore your options.