How Assumable VA Loans Work

Many people are turning to VA loan assumption as a way to obtain a home without going through a strenuous lending process.
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VA Loans vs traditional loans

In today’s real estate and mortgage market, finding a home that meets your preferences, let alone qualifying for a home, can be challenging. As a result, many people are turning to VA loan assumption as a way to obtain a home without going through a strenuous lending process.

Although assumable VA loans are known for being easier to get, they still require certain eligibility standards to be met. Let’s dive into the specifics of VA assumable loans and unpack what requirements need to be met to be approved for this type of lending.

Are VA Loans Assumable?

The short answer is “yes,” VA loans are assumable. From going through a pivotal life event, such as a divorce or relocation, or experiencing financial hardship, there are many reasons why a military member or veteran may agree to someone assuming the VA loan on their home.

Those wanting to go through VA loan assumption will need to meet with a VA lender to determine their eligibility and go through an approval process. Don’t worry; your loan officer will walk you through the steps and let you know what documentation is needed to get you to the closing table.

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How Assumable VA Loans Work

The concept of assumable loans is relatively straightforward. A military member, veteran, or surviving spouse, for whatever reason, can decide to pass on their loan obligations to another veteran, active military member, surviving spouse, or non-military citizen.

Of course, the person wanting to assume the loan must first pass the eligibility requirements by either the original VA lender or their new preferred VA lender. If approved, the assumptor then takes on the full responsibility of paying that VA loan while also benefiting from the original VA loan’s terms.

VA Loan Assumption vs. VA Loan Refinancing

Many would consider going the VA loans assumable route much more beneficial than refinancing. In a variety of ways, assuming a VA loan can be much easier and less costly than completely refinancing a loan. Typically, the progression of VA loan assumption does not require a substantial underwriting process, meaning you can save on the fees you otherwise would have to pay by refinancing.

Furthermore, the assumptor stands to inherit the ideal terms of the original VA loan, such as a low-interest rate and no requirement to hold private mortgage insurance (PMI). With the mortgage industry constantly fluctuating its interest rates, this is considered a significant benefit! Between avoiding high transaction fees and acquiring an impressively low-interest rate, it’s understandable why many choose a VA loan assumption.

For more information about refinancing a VA loan, review our article Should You Refinance a VA Loan? The Pros and Cons of Refinancing.

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Eligibility Requirements for Assuming a VA Loan

Before we launch into the eligibility requirements you’ll need to meet before assuming a VA loan, it’s essential to recognize that each VA lender will have their own set of added criteria on top of what is standard. Speaking with your lender about their conditions is the best way to get a clear view of what it takes to assume a VA loan.

With that being said, here are the general eligibility requirements for assuming a VA loan:

  • Demonstrated ability to repay the loan consistently and reliably
  • The home will be the primary residence of the assumptor
  • Assumptor has available VA loan entitlement (expectations are different for non-military borrowers)

Your VA lender will let you know what documentation they need in order to determine if the borrower is approved for the VA loan assumption. So, ensuring you are prepared ahead of time to provide that information can help streamline the process!

The VA Loan Assumption Process

Getting the VA assumable loan process started is really as easy as contacting your preferred VA lender and letting them know that you would like to assume a VA loan. Most commonly, the assumptor of a VA loan is a military member themselves, a veteran, or a surviving spouse of a service member.

However, non-military borrowers can also get approved for VA loan assumption by passing a credit check and getting approved by the current VA lender of the home. Here are the general steps those assuming VA loans go through:

VA Loan Assumption Process

  • Contact a Lender: Conveniently, you don’t have to work with the original lender of the VA loan. Reach out to your preferred lender and let them know that you would like to begin the process of assuming a VA loan.
  • Complete the Application Process: Your lender will guide you through the application process. Once you’ve provided all of the necessary information, they will conduct a credit and income assessment to verify your ability to repay the loan.
  • Provide Required Paperwork: If you are a military member or veteran, you’ll need to provide a Certificate of Eligibility (COE). Non-military members or those who are not surviving spouses will be asked to meet the lender’s specific eligibility parameters for assumptors without a military background.
  • Approval & Closing: Your VA lender will review all of the information provided (application, credit, and other documentation) to determine if the borrower is approved for assuming a VA loan. If approved, the original borrower and the assumptor will need to complete closing paperwork, such as the loan assumption agreement.

Even though the borrower is assuming the conditions of the existing VA loan, there will be additional expenses to cover the transaction. It’s important to note that, at closing, the assumptor is typically required to pay any fees associated with the assumable VA loan process.

To ensure you are not blind-sighted by unexpected costs, speak to your VA lender beforehand about any fees you’ll be responsible for at closing.

How Long Does a VA Loan Assumption Take?

Although assumptors can bypass demanding underwriting workflows that come with other lending types, assuming a VA loan isn’t known for being an instant process. Averaging 30-60 days to closing, assumable VA loans are less stressful and demanding, but they still take some time to be approved.

To make the timeline even faster, assumptors can ensure they are giving their VA provider all of the information needed as quickly as possible to get the process moving.

How To Find VA Assumable Loans

Many people approach VA lenders about assuming a VA loan from a family member or acquaintance. However, if you haven’t organically come across a VA assumable loan, there are a variety of strategies you can try to find what you are looking for.

You can first begin by researching military-related websites that specialize in connecting military members with housing or VA lending solutions. Sometimes, these sites have specific assumable VA loan services that you can take advantage of.

If you’re in the market to assume a VA loan, you can connect with military relocation professionals (MRPs), also known as military real estate agents. These experts have contact with existing VA homebuyers, and they may be willing to connect you with someone who is open to having their VA loan assumed.

The Pros and Cons of Assuming a VA Loan

As it goes for most things in life, there are both “pros” and “cons” of assuming a VA loan. While there are a few drawbacks, it’s noteworthy to know that many consider the assumption of a VA loan to be a major win. In fact, as long as the nature of an assumable VA loan aligns with your life goals, the benefits overpower the downsides.

The Drawbacks of VA Loan Assumption

Let’s start with the “cons” of assuming a VA loan because there aren’t many to consider! One of the top drawbacks of assuming a VA loan is the limited inventory of homes available on the market. If you are someone who is actively seeking assumable VA loan homes, you may find yourself in a situation where the homes aren’t matching your preferences.

Regarding loan assumption disadvantages, borrowers also often ask, “Will loan assumption hurt my credit?” All homebuyers should know that purchasing a home, even assuming a VA loan, will likely require a “hard” hit on your credit that will temporarily lower your credit score.

However, the only way for an assumed VA loan to harm someone’s credit long-term is if the assumptor fails to make the mortgage payments on time. Therefore, a potential credit check isn’t considered a drawback of assuming a VA loan.

Learn more about the 5 Potential Disadvantages of a VA Loan to determine if it’s the right path for you!

The Benefits of VA Loan Assumption

There are many reasons why someone may seek out assumable VA loans, and most of those benefits add up to cost savings. By taking on a VA assumable loan, you can look forward to taking on the original, favorable terms of the loan as well as reduced transaction fees. As such, it’s important for assumptors to review the terms of the loan ahead of time to determine if it is worth the effort.

In addition, the VA loan assumption process is known for being much easier and less demanding than the traditional route of obtaining a home loan. This gives those who may struggle with getting approved for their own loan a chance to be homeowners!

Frequently Asked Questions About VA Assumable Loans

Assuming a VA loan can be a bit complicated, so it’s understandable if you still have some lingering questions. Check out the information below to uncover more information about the VA assumable loan process and other facts about this special financing option.

How does a VA assumable loan differ from a conventional assumable loan?

The VA assumable loan is known for having more lenient eligibility requirements compared to a conventional assumable loan. Although these standards already vary from lender to lender, conventional loans are known for putting more emphasis on the borrower’s creditworthiness before they approve the assumption.

Furthermore, many conventional loans are not assumable in the first place as the terms and conditions quote a “due-on-sale” clause. These clauses state that the home must be paid off in full before it is transferred to another buyer.

How many times can you assume a VA loan?

Good news! There isn’t a specific limit on how many times you are allowed to assume a VA loan. However, don’t forget that assuming a VA loan will impact the entitlement of the assumptor and the original borrower. For example, an assumptor wanting to purchase a home in 2024 with a VA loan may be unable to do so until they pay off or sell the home of the VA loan they had purchased back in 2016.

Speaking to a lender who specializes in VA lending can help you take a strategic approach to purchasing homes with your VA benefit. Learn more about How to Apply for a VA Loan so that you can come prepared.

What is the VA assumption processing fee?

Whether you are purchasing a home with a conventional loan or assuming a VA loan, there will be many professionals hard at work in the background, making sure everything goes as planned. Although VA loan assumption doesn’t require the same level of underwriting as, let’s say, an FHA or conventional loan, the process still requires the work of experts.

As such, each lender sets their own “assumption processing fee” to ensure their time spent on your assumable VA loan is compensated. This assumption processing fee is known for being much lower than with other financing options, and it differs between lenders.

Borrowers assuming a VA loan should also be aware of the VA funding fee. This fee goes directly to the Department of Veterans Affairs and is used to help support the VA loan program. Most first-time VA borrowers could expect to pay 2.15% of the loan amount, but for those assuming a VA loan, the fee is only 0.5%. This fee is required for all VA borrowers, regardless of military status, unless you qualify for an exemption.

Does an assumable VA loan have to be assumed by a veteran?

While VA loans were originally designed to ensure active duty, military members and their families receive adequate housing, even non-military citizens can assume them. Typically, to determine eligibility, veterans, military members, or surviving spouses would produce a Certificate of Eligibility (COE) from the VA.

Since civilians without military affiliation have no way of receiving a COE, the VA loan assumption process looks slightly different for them. For example, they may go through a more extensive work history and credit check experience than someone who already has access to VA benefits.

Consult a VA Loan Specialist

Are you ready to explore the benefits of assumable VA loans? Discover how you can take advantage of this unique opportunity to assume a VA loan and secure your dream home by contacting your preferred VA lender.

By speaking to a VA loan specialist, you can rest assured that you are receiving information that is personalized to your circumstances and those of the original borrower of the VA loan you wish to assume.

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  1. Brooke M. Lippert says

    good info, however; still leaves a few questions:

    I am a Vet, pre-approved for VA and VA rehab loans 300k-315K with a credit score around 690, and low debt to income ratio, and I live/looking to purchase in citrus county Florida.

    Can you only assume the amt owed? or can it include equity built in the home? If not, can you take out a second to cover the equity? eg> owe 100k, asking 300k. Can u assume 300k at original loan terms, or only the 100k owed, then 2nd mortgage for additional 200k-at current rates?

    Can you ask for $ back when ur assuming a loan- for closing costs and/or repairs? As long as original loan is pd in full? eg. owe 100k, asking 300k, but offer is 300k with 50k back at close?

    Any info would be most appreciated!!

    • Ryan Guina says

      Brooke, these are great questions.

      Assuming a VA Loan is essentially having the loan transferred to your name. Let’s look at your example of a $300,000 home in which the owner still owes $100,000. The seller wants to sell the home for $300,000. So, the buyer may be able to assume the $100,000 outstanding mortgage. But they would need to come up with a $200,000 down payment, or they would need to work with the lender to see if they could get a second mortgage for the difference (this would be at current rates). However, not all lenders are willing to offer a second mortgage in these situations. Many require the buyer to put cash down for the outstanding balance.

      I recommend working with a VA Loan provider. They can answer all of your questions and help you understand your options. Best wishes!

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