VA Loan Assumption – WeVett

VA Loan Assumptions: What You Need to Know in Today’s Housing Market

Savannah Stephens — Wed, 16 Apr 2025 15:58:06 +0000

We get it – the market today is competitive and finding a good deal can feel like spotting Bigfoot – rumored to exist, but rarely seen. Higher rates are making VA loan assumptions a hot topic. Buyers and sellers are exploring this unique option to make homeownership more affordable. But what exactly is a VA loan assumption, and how does it work? Let’s break it down.

What Is an Assumable VA Loan?

An assumable VA loan is a mortgage that allows a buyer to take over the seller’s existing loan. This means you get to inherit their sweet interest rate, remaining loan balance, and repayment schedule.

VA loans, which are backed by the U.S. Department of Veterans Affairs, are assumable—a MAJOR advantage in today’s market where many sellers have locked in rates far below current levels. (Have we mentioned we love the VA loan?)

For example, if a seller has a VA loan with a 3.25% interest rate, the buyer could assume that loan instead of securing a new mortgage at a higher rate. That’s like getting a first-class plane ticket for the price of a middle seat in economy, winning!

Who Qualifies for Assumable Loans?

You might assume (pun intended!) VA loan assumptions are only available to veterans or service members, but that’s not always the case. Both military and non-military buyers can assume a VA loan. Here’s how it works:

Veterans or service members with VA loan eligibility: If the buyer is also eligible for a VA loan, they can assume the mortgage and the seller’s VA loan entitlement.
Non-military buyers: Civilians can assume a VA loan but cannot use VA benefits. The seller’s VA entitlement will remain tied to the property until the loan is paid off or refinanced. This can limit the seller’s ability to use their VA benefits for a future home.

What Does the VA Loan Assumption Process Look Like?

Spoiler alert – assuming a VA loan is not as simple as a traditional home purchase—it requires lender and VA approval. Here’s a step-by-step breakdown:

Loan qualification: The buyer must meet the lender’s credit and income standards, typically requiring a credit score of at least 620 and a debt-to-income (DTI) ratio below 41%.
VA approval: The assumption must be approved by the VA or the lender servicing the loan.
Funding fee: VA loan assumptions require a 0.5% funding fee of the remaining loan balance.
Transfer of liability: Once the loan is assumed, the buyer becomes responsible for the payments. However, if the buyer is not VA-eligible, the seller’s entitlement remains tied to the property.

What Is the Assumption Gap?

The assumption gap is a key factor to consider in VA loan assumptions, aka the fine print. Since the buyer takes over the seller’s remaining loan balance, they must cover the difference between the purchase price and the existing loan.

For example:

A home sells for $400,000, but the seller’s VA loan balance is only $300,000.
The buyer must cover the $100,000 gap through cash, a second loan, or other financing methods.

This upfront cost can be a barrier for some buyers, especially in competitive markets with higher home values.

Is a VA Loan Assumption Worth It?

In today’s market, VA loan assumptions can be a smart financial move—especially when the seller’s interest rate is significantly lower than current rates. However, buyers need to consider the assumption gap and ensure they have the necessary funds.

For sellers, offering a VA loan assumption could make your home more appealing to buyers. Just be cautious if the buyer isn’t VA-eligible – it could leave your VA benefits tied to the property longer than expected, limiting your ability to use them for future homes.

The Bottom Line for VA Assumptions

VA loan assumptions offer a rare opportunity for buyers to secure a low interest rate in an environment with higher rates. While the process involves a bit of red tape and potential cash gaps, the long-term savings can be well worth it.

And hey, in this market, who wouldn’t want a lower mortgage payment? You can learn more about the assumption process with our VA Loan Specialist here.

How to Transfer a VA Home Loan to Get a Better Interest Rate

Shannon Kaufman — Wed, 07 Jun 2023 16:26:11 +0000

Remember those dreamy years when mortgage interest rates were happily dancing around at the 2% club?

Buying a house with the VA loan was like waltzing into a mansion with a bag of cash and a martini while waving goodbye to your old, fixer-upper from that last PCS. (Never mind that you had to battle your way to the front door through a frenzy of other homebuyers.)

Those were the days.

And now…we have these days. Where 5% is amazing and 4% is unheard of!

As a military home buyer, how do you approach this new, expensive real estate landscape?

There are a lot of options which we will cover in the next few months, but let’s first tackle one of the most interesting topics of the moment: How to Transfer a VA Loan.

Did you know, a VA Home Loan can be transferred to someone else?

As in, homeowner #1 locked in a low rate back in 2020 and now homeowner #2 would like to buy the house and also keep that same rate by assuming homeowner #1’s loan.

What!? Yes, it’s possible!

VA loans are transferable as long as your lender allows it. It is called a “loan assumption.”

What is a VA Loan Assumption?

A VA loan assumption is when a buyer assumes financial responsibility of the seller’s VA loan.

The lender will verify that the buyer of the home meets all VA loan requirements and could qualify for a VA loan on their own.

Fun fact: The person assuming the VA loan does not have to be a qualified Veteran or Servicemember, as long as they meet the lender’s financial VA loan requirements.

The buyer must meet all lender credit and income requirements, must assume all mortgage obligations, and pay the VA funding fee unless otherwise exempt.

The VA funding fee on a VA loan assumption is 0.5% of the remaining loan balance.

How do I find an assumable VA loan?

The best way to find an assumable VA loan is to work with a real estate agent. Our affiliate, WeVett Realty can help with that!

The MLS (Multiple Listing Service), which is used by REALTORs, can show homes with assumable loans.

Make sure you communicate with your agent that you are eligible for a VA home loan and would like to assume one, if possible.

You can sometimes also find other military who are open to transferring a va loan in the local facebook group or spouse group for your specific duty station.

What’s the Catch?

There’s a few liabilities when transferring a VA home loan.

VA homeowners must ask for a “release of liability” form from their lender, or their credit could take a significant hit if the assumer of the loan makes late payments or defaults.

Another catch is that if the person assuming the VA loan does not have enough VA entitlement, the seller’s entitlement will be tied up until the loan is paid in full.

What does that mean? If the buyer only has $300k in VA loan entitlement, but the house they are purchasing is $400k, they do not have enough loan entitlement to assume the loan on their own. The seller’s VA loan entitlement would stay tied up, meaning they likely could not purchase another home with a VA loan until the home is paid off.

The seller can ask the buyer to formally substitute their entitlement through a “Substitution of Entitlement” with the VA.

The ins and outs of how to transfer a VA Loan can be a bit tricky, but the end result can be totally worth it – ie. dollars saved, PCSs salvaged, and military homeownership lives on to fight another day. Thanks Assumable VA Loans!

If you’re looking to transfer a VA home loan or have more questions about the process, reach out to us at 316-669-5272 or submit a form here.