Are VA Loans Assumable?

Troy Reichert

Troy Reichert

Troy Reichert is the owner of Reichert Mortgage LLC. With over 20 years of serving the United States Airforce, Troy wants to continue to give back to the community by helping give people their best chance at securing a home.

Living in Colorado Springs, we are honored to be surrounded by many active-duty members of the military and veterans. As a veteran myself, I am proud to connect neighbors with education about the vast benefits of VA Loans. An underserved quality of VA loans is the ability of prospective buyers to assume a VA loan. While VA loans are traditionally only approved for active duty, veterans, and surviving spouses, VA loan assumption may be utilized by anyone who a mortgage lender deems able to take over the financial obligations of the loan. VA loan assumption has a great deal of advantages for both buyer and seller, but guidelines that recognize the cons of VA loan assumption should be considered before moving forward with the program.

Pros of VA Loan Assumption 

For sellers with a VA loan, the option to extend VA loan assumption to other veterans and civilians alike is an impressive bargaining chip due to the wealth of benefits involved in the VA loan assumption process. For the buyer, VA loan assumption negates the need to apply for a new loan and enables the buyers to avoid paying closing costs and appraisal fees which leads to a great deal of savings while streamlining the home buying process. Under VA loan assumption, the buyer takes on all financial obligations of the original loan, including the initial rate the loan closed on. As funding fees for loans increase over time, it is a significant benefit to inherit lower rates than the current market may be offering. The ability to assume lower interest rates while avoiding closing costs and standard application fees leads to impressive savings for the buyer while enabling a seller to streamline the selling process.

Cons of VA Loan Assumption

The greatest complication of VA loan assumption lies within the military status of the buyer. While VA loan assumption can apply to civilians, the veteran giving up the loan loses VA loan entitlement. However, if the terms of the existing VA loan are assumed by another member of the military, then both the veteran selling and veteran buying the home will maintain their VA loan entitlements. Another instance to be aware of is that not every mortgage lender has the authority to approve VA loan assumptions. If the lender you are looking to connect with does not have the authority, then additional fees may be required to submit the application to the VA loan office, which will likely slow the process. Depending on the goals in terms of time and financial obligations, these disadvantages may overpower the pros of VA loan assumption, so it is important to connect with your local lender to discuss how the program may work for your needs.

VA Loan Assumption Process

It is important to connect with a lender with a great deal of experience working with VA loans since the options may vary depending on the time the original loan was closed and the climate of the current market conditions. The buyer, veteran or civilian, must be deemed financially able to accept the financial obligations of the current loan based on credit score, LVT, and other financial factors. The buyer should be prepared to cover the funding fee which is a percentage of the existing principal loan balance as well as a processing fee. All VA loans closed after March 1, 1998, must be approved for a VA loan assumption by a reputable lender and the seller must release liability in order to not incur negative financial damage.

VA Loan Experts | The Reichert Mortgage Team

 At The Reichert Mortgage Team in Colorado Springs, we live and breathe VA Loans in order to enable our neighbors to reap the benefits of the VA loan program. VA loan assumption can be the ideal solution for both buyers and sellers under specific circumstances, so connect with our reputable brokers today to discuss how this option may benefit your financial future. We are proud to connect with veterans across El Paso County about how a VA loan may work for every unique situation.

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