Who qualifies for assumed loans?

They’re pretty rare, but in general, government loans have the ability to do assumed loans. That’s VA loans, USDA loans, and FHA loans. That’s typically what we see today.

Now, from a buyer’s perspective, there’s something to keep in mind. In general, you have to qualify still for that loan.

So, if you have an assumed loan and you’re wanting someone to assume it, you can’t just give it to your good friend or cousin that has no job and can’t qualify for a mortgage in the first place.

Doesn’t work that way. Buyers still have to qualify.

Keep that one in mind, especially sellers who go down this path.

We’ve seen it before, they don’t fully understand that. You go 30, 60 days into this, working with a servicer, try to get going and find out, “Oh, they can’t qualify,” and you just wasted a lot of time.

Buyers still have to qualify for the loan from the seller.

The other thing is, if you’re a buyer trying to get an assumable loan, the key is it has to be your primary residence.

You can’t just assume someone’s loan and it be an immediate investment property.

Like VA loans, they can only be used for primary residences, meaning you intend on living in them.

Same thing, you’ve got to qualify for the VA loan based on it being a primary residence.

Now, all assumable loans can be assumed by veterans or non-veterans. So, USDA loans, anyone could essentially assume that as long as they qualify. Same thing with the FHA loan.

VA loans, however, have a unique aspect to it. And that’s if you, as the owner of that home, are giving up the assumable loan.

If you want to make sure you get your full VA entitlement restored, meaning that you get all your VA entitlement back so you can go keep using the VA loan with its full ability to use, you have to make sure it’s another veteran assuming your loan and you do what’s called a substitution of entitlement.

Big difference between other assumable loans you want to keep in mind – if you’re ultimately doing a VA assumed loan as a seller, you want to make sure it’s with another veteran.

And then you really need to make sure they do what’s called that substitution of entitlement.

If they don’t do that, well, it’s just like a non-veteran, and your VA entitlement could be held up and that could bog down and prevent you from utilizing or using the VA loan again.

Something to really keep in mind.

So, most cases we see assumable VA loans being assumed by other veterans and having that substitution – so the seller of that home can go out and have their full VA entitlement to go get more homes with the VA loan.