Are VA Loans Assumable?
Published by Contour Mortgage on August 02 2017

Are VA Loans Assumable?

Topics: Veterans

Military veterans receive a wide range of benefits during and after their service. The opportunity to get a VA home loan is one of the most popular benefits that veterans receive. The loans often have low interest rates and don't force borrowers to pay for mortgage insurance.

Active service members can use a VA loan to purchase homes, but many of them transfer to new locations before they finish repaying their loans. Thankfully, VA loans are assumable in most cases. This feature can make it much easier for you to sell your home when you need to move.

What Are Assumable Loans?

Assumable loans are mortgages that let home buyers assume the remaining debt of a property's previous owner. Many people find assumable mortgages attractive because they want to take advantage of the low interest rates given to soldiers and veterans. Instead of securing a new loan, a buyer can assume the existing loan.

However, although VA assumable loans usually come with low interest rates, buyers may have to spend a lot of money up front to pay off the existing debt. For instance, if a soldier has $100,000 left to pay on his or her mortgage, the buyer will have to make a down payment that meets or exceeds that amount. Instead of making a down payment worth 10 to 20 percent of the home, the buyer has to assume the mortgage's existing balance.

In some cases, buyers borrow money so they can cover the existing debt. While this approach can make buying a home easier, some banks will not lend you money to assume a VA mortgage. If you want to get an additional loan, then you will have to shop around to find the right lender that charges affordable interest rates.

Are VA Loans Assumable?

The rules regulating VA loans have changed a bit over the last few decades. Whether or not your VA loan is assumable depends on when you purchased your home.

VA loans that were closed before March 1, 1988 are completely assumable. Soldiers and veterans selling their homes do not have to get approval from the VA or bank. Instead, they can pass the loans on to the new owners without reservations.

If you have a VA loan that was closed after March 1, 1988, you can still let a buyer assume the debt. You will, however, have to get approval from the lender before you finalize the transaction. Assuming that the bank lets you transfer the loan's balance, the VA will almost always let you proceed without limitations.

Get the Latest Information About VA Loans

In most cases, VA loans are assumable as long as you can get approval from the lender and the VA. As with many military benefits, though, it makes sense for you to stay in contact with your representative at the VA. The VA can give you the latest information on the best way to transfer an assumable loan to a home buyer. Talking to someone at the VA will help you avoid problems when transferring mortgage debt to a buyer.

If you are a soldier or veteran, an assumable loan can make buying a house more attractive. When it comes time to sell your home, plenty of people will want to take advantage of your low interest rate by assuming your loan. VA loans not only have low interest rates that help you save money while you live in your home, but they also make it easier to sell the property when you want to move.

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