VA Loan Assumption - Can VA Loans Be Assumed? VA (Veteran’s Administration) loans are guaranteed loans available to veterans to purchase homes for their residency. Private lenders, such as savings and loan companies, banks or mortgage companies, provide the financing for the loans. The Veteran’s Administration guarantees that the lender will be paid for the loan should the veteran default for whatever reason. Below are the facts about the loans, including if others can assume them. Can These Loans Be Assumed? As of November 17, 2009, the laws regarding the assumption of Veteran Administration loans have changed. If veterans are being stationed elsewhere, being deployed or just wanting to sell their home before the loan is paid in full, they no longer need to worry about losing the home or the money invested in the home. In some cases, the veteran may be able to sell the home to another individual simply by allowing the individual to just assume the loan. Who Can Assume a VA Loan? The assumption of a VA loan is not limited to just veterans. The individual wishing to assume the loan does not have to be a veteran. However, the individual assuming or taking over the loan and the original borrower may have certain restrictions they must follow depending on the date the original loan was closed. • If the original mortgage loan was closed prior to March 1, 1988, there are no restrictions regarding approval from the original lender or the Veteran’s Administration. However, the veteran is liable if the Veteran’s Administration incurs any loss stemming from the assumption. • If the loan was closed after March 1, 1988, certain restrictions apply. The major restriction is that the lender must approve the assumption for it to go through and for the veteran to be released of any liability for the loan. • If the veteran homeowner is getting a divorce, he or she will be allowed an unrestricted transfer. The situation involving this scenario is if one of the borrowers is military and the other is non-military. Both spouses must sign a release of liability to ensure that the borrower leaving the loan is not liable for the loan in the future. Unrestricted transfers must have VA approval. In all the above situations, it is to the veteran’s advantage to get the lender’s approval even if it may not appear to be required. Failure to do so could result in the veteran getting a “due on sale” notice from the VA. They also may want to check when they will get their loan eligibility back from the VA. Advantages of a VA Loan Assumption
There are times when a loan assumption can be very beneficial to both the veteran and the individual assuming the loan. • The new buyer can benefit if the mortgage’s interest rate is lower than he or she would get with a new loan. • Both the veteran and the buyer can avoid settlement costs. • Rather than take out a second mortgage, the new buyer can pay cash for the difference between the current mortgage’s balance and the agreed-upon selling price if they are different. • The veteran will no longer be liable for a loan if specific situations would make it difficult to meet the financial obligation of a mortgage loan.