VA guidelines

VA Loan Assumption

January 20, 2015

VA Loan Assumption

va loanOne of the attractive things about VA home loans is that they are assumable–a veteran can “sell” the home by allowing a third party to assume the VA loan payments and responsibility for the mortgage.

According to the Department of Veterans Affairs, “Most homes purchased or refinanced with a VA-guaranteed home loan are eventually sold with the mortgage paid off at closing. Under certain circumstances, it is possible for a veteran to sell the property subject to the assumption of the VA guaranteed loan payments by the purchaser.”

The person assuming the VA loan payments does not have to be a fellow veteran. VA loans closed before March 1, 1988 are “freely assumable” which means the Department of Veterans Affairs will “allow the loan to be assumed without the approval of VA or the loan holder. Please note that the veteran still remains liable for any loss associated with the VA loan should the assumer fail to meet the mortgage obligations,” according to the VA rules.

All VA loans assumed after March 1, 1988 must have the assumption “approved by the loan holder. If an assumption is approved by VA or the loan holder, the veteran is released of liability in the event the assumer defaults on the loan resulting in a loss to VA,” according to VA Regional Loan Center Release No. 05-04.

Now, when a borrower commits to a VA mortgage, the law requires a prominent statement in “the instruments evidencing the loan” stating that the VA loan is not assumable without prior approval from the VA or its “authorized agent.”

There is a required clause regarding the VA funding fee. When you commit to a VA loan, part of the language in the contract will include a statement on the VA funding fee. Assumed loans require “a fee equal to one-half of 1 percent of the balance of this loan,” which is payable on the date of transfer.

Additionally, “…if the assumer fails to pay this fee at the time of transfer, the fee shall constitute an additional debt to that already secured by this instrument, shall bear interest at the rate herein provided, and at the option of the payee of the indebtedness hereby secured or any transferee thereof, shall be immediately due and payable.”

To summarize, VA loans are assumable, with approval, by vets and non-vets alike. A VA loan funding fee applies to the loan assumption, which is payable at the time of transfer. For more information contact the VA at 1-800-827-1000.

  1. tom a

    i assumed my 1st mortgage as a va but am not a vet- and have a 2nd mortgage- nobody will refinance me- can anybody help? i am close to 80% ltv- and never late - but even harp - only helps you if youre in fannie or freddie- that sux-

  2. Elizabeth

    If an assumption of a VA mortgage without substitution of eligibility is being applied for can the property be used as a rental purposes?

    • Joe Wallace

      You may need to discuss the specifics of this situation with the lender and see what the terms of your loan assumption agreement dictate.

  3. Mary Quint

    Both my husband and I are veterans. I am trying to assume my ex-husbands mortgage which is in both of our names for a loan. I have a quick claims deed but now the house is in foreclosure. He is a 100% SC and I have helped him and got behind on my loan. Is there anyway to assume the loan? I applied for a remodification through Wells Fargo but was not approved even though I just got a GS-11 job and I am retired military. They said it all looked good but the VETERANs ADMINISTRATION disapproved it. Who can I talk to, I want to know why?

    • Joe Wallace

      Contact the VA directly by calling 1-800 827-1000.

  4. Richard Kenendy

    I am a 10 % disabled veteran and will be assuming a VA loan from a veteran's widow. The lender is calculating a VA funding fee. As a disabled service connected vet, I thought I was exempt from VA lending fees. Is charging the fee correct for an assumption?

    • Joe Wallace

      If you receive or are eligible to receive VA compensation for service connected disabilities you would be exempt from the VA loan funding fee. Your Certificate of Eligibility should reflect exempt or non-exempt status and that is what the lender would go by.

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