In some cases, a VA loan may be assumable, that is the buyer can take over the VA loan regardless of whether they are civilian or military. At one time, all homes purchased with a VA loan were considered assumable, but since then the rules have changed. Only lenders and the VA can approve a loan assumption. VA loan assumability varies, depending on the age of the loan and the specific policies of your lender and loan servicer.
Latest VA Loan Assumption Rules
VA loans closed after March 1, 1988, are not eligible for VA loan assumption unless you obtain prior approval from the lender. Generally, there are two processes for loan assumptions:
- Loans serviced by lenders who have automatic authority may process assumptions without sending every loan to the appropriate VA Regional Loan Center
- Loans serviced by lenders who don't have automatic authority must send all assumption requests to the appropriate VA Regional Loan Center, which can take several weeks to process
When loans are assumed, it's the servicer's responsibility to ensure the borrower who is assuming the property meets VA and lender credit standards. In most cases, the person assuming the property must also have VA eligibility, although there are a few instances when someone without VA home loan entitlement can assume the loan.
VA home loans may be freely assumed if the loan closed before March 1, 1988. In these cases, the loan assumption is unrestricted. The buyer assumes the VA loan without requiring the approval of the bank or the VA.
VA Loans Not a One-Shot DealGet a lifetime of homeowner benefits with the VA Loan. Compare top VA Lenders now. →
Who is Liable After a VA Loan is Assumed?
It's important for veterans to understand that if they choose to have their loan assumed, their entitlement may not be restored. That's because the VA loan entitlement will still be tied up in the mortgage to this property. After a non-veteran buyer assumes your VA loan, you could be liable in the event of a default. The buyer may be allowed to sell the home once more and let a third party assume the loan with the veteran still liable for losses to the VA.
If you're selling your house to another veteran homebuyer, it may be possible to "swap" entitlement. In these cases, restoration of entitlement is usually possible. Even if your loan is eligible for an unrestricted VA loan assumption, it's important to consult with an approved VA lender and carefully vet potential buyers before agreeing to this type of sale.
VA Loan Assumption Pros and Cons
As you explore VA loan options, consider the pros and cons of a VA loan assumption:
- Rates may be lower than what's available today
- Reduced closing costs o Sellers can add an edge in a high-inventory real estate market by offering loan assumption
- Seller could lose all or part of their entitlement if the buyer isn't an eligible veteran
- Buyers will likely need a large down payment to cover the seller's equity o Not all lenders consider VA loans assumable
VA loan assumption can be a good option when compared with a traditional sale. Still, it's important to do your research and always consult a VA loan professional before you agree to an assumption. Ultimately, it will be up to your lender and servicer to decide whether a VA loan assumption is possible.