With no down payment required and no mortgage insurance, the VA home loan is one of the best mortgage programs available. The catch, however, is that VA loans are available only for military service members, veterans, and eligible surviving spouses.
Fortunately, a “loophole” exists for non-veteran homebuyers — the VA loan assumption. It allows buyers to take over an existing VA loan, bypassing most of the hassle and expenses that typically come with securing a new loan.
VA loan assumptions offer benefits to veteran homebuyers, sellers, and non-veterans alike. But there are risks. Here’s what to know as a buyer or seller.
What is an Assumable VA Loan?
If the mortgage on a home is a VA home loan that closed after March 1, 1988, it is an assumable VA loan.
A VA loan assumption is when a mortgage borrower takes over or “assumes” an existing mortgage, including the existing loan’s balance, interest rate, and monthly payments. This arrangement can be a great advantage for both buyers and sellers.
Three Things Buyers Should Know About VA Assumptions
As a home buyer, here’s what you need to know about VA loan assumptions.
1. Who Can Assume a VA Loan? (Hint: You Don’t Have to Be a Veteran)
Homebuyers may be eligible to assume a VA loan even if they aren’t an active duty service member, veteran, or surviving spouse.
Note, however, that it could be extremely difficult to find a seller willing to let non-veterans assume their loan. Not only do they lose their ability to use a VA loan again, but they remain on the hook if the non-veteran defaults. Expect to find a willing veteran seller typically only in distressed sale situations.
For an assumption to flow smoothly from one homeowner to the next, the new borrower must meet certain qualifying criteria. Requirements typically include the following:
Credit. The VA itself does not set a minimum credit score requirement for loan assumptions. However, most lenders — including Refi.com — require a minimum score of 620. Keep in mind that individual lenders may set their own requirements, so it’s worth confirming with the loan servicer handling the assumption.
Employment and income. New borrowers must document their employment and income. Most lenders require that total housing and debt payments not exceed 41% of gross income.
Occupancy. The buyer must intend to occupy the home as their primary residence.
Funding fee. The new buyer is required to pay a funding fee of 0.5% of the loan amount — less than a veteran pays when originating a new VA loan.
It’s important to note that lenders are not required to approve a VA loan assumption. As a buyer, your first step is to confirm it’s possible with the current loan servicer.
And while VA loans don’t require a down payment, buyers will need cash on hand — or a secondary loan — to cover the difference between the outstanding mortgage balance and the current sales price.
Example:
- Sale price: $400,000
- Existing VA loan: $300,000
- To purchase the property: Assume the VA loan and pay the seller $100,000 via cash or an additional loan
2. Benefits of Assuming a VA Loan
Designed as a benefit for veterans, VA home loans offer significant advantages over other mortgage types — making them a powerful bargaining tool for sellers and highly appealing to buyers looking to assume one.
No PMI
PMI, or Private Mortgage Insurance, is typically required on loans where the buyer puts down less than 20%. It can add hundreds of dollars to your monthly payment. VA loans do not require PMI.
Lower Mortgage Rates
VA mortgages generally offer lower interest rates compared to other loan types. In today’s market, where rates have risen sharply, an assumable VA loan rate could be significantly lower than current mortgage rates — potentially saving you a substantial amount, even after factoring in the 0.5% funding fee.
Lower Costs
VA loan assumptions come with fewer fees than traditional purchase loans. Appraisals aren’t required, which saves both time and money.
3. Finding a VA Assumable Mortgage
The Department of Veterans Affairs does not maintain a public list of assumable VA loans, so finding one requires some legwork.
Be proactive in your search and clearly communicate with lenders, real estate professionals, and sellers about your goal. Here are some ways to get started:
- Lenders and Loan Servicers: Check with banks and mortgage companies that service VA loans. They may be able to point you toward assumable opportunities or connect you with sellers. Keep in mind that lender approval is required for any assumption.
- Real Estate Agents: Work with agents who are knowledgeable about VA loans and the assumption process. They often have access to relevant listings or can network to find them. Be upfront about your interest in an assumption from the start.
- VA Loan Specialists: A VA loan specialist can help you navigate the process from start to finish, from identifying potential loans to completing the assumption paperwork.
- Online Platforms: Real estate platforms like Zillow, Realtor.com, and MilitaryByOwner allow you to filter listings by loan type, making it easier to spot assumable VA loan opportunities.
- Social Media and Networking: Groups focused on military relocation, veteran housing, or assumable mortgages can help you connect with sellers and others interested in loan assumptions.
Three Things Veteran Home Sellers Should Know About Letting Someone Assume Their VA Loan
As a seller, offering an assumption has real benefits — but some risks, too.
1. Get Top Dollar for the Home
A VA assumable loan can make your property significantly more attractive to buyers, especially during periods of rising interest rates. For example, you could command a premium if you can offer a buyer a 3% VA loan in a market where new loans are being originated at 6–7%.
2. Find a Veteran Buyer, Get Your VA Loan Entitlement Restored
If the buyer is also a veteran and qualifies for entitlement substitution, the seller can have their entitlement restored — meaning the seller may qualify to use their VA loan benefit again on a future home purchase.
3. VA Entitlement Loss: Potential Risk for Sellers
VA loan entitlement is how the VA determines whether a service member or veteran qualifies for a VA loan.
If the new borrower is eligible for VA loans and has sufficient entitlement, the seller can request an entitlement substitution. But if the new borrower doesn’t have adequate entitlement, the seller’s entitlement will remain tied to the property until the loan is paid off.
As a seller, it’s essential to confirm whether the borrower has sufficient entitlement for a substitution before proceeding.
The good news: if the buyer assuming your loan is also an eligible military borrower, you may still qualify for another VA loan. You can request that the VA restore your entitlement at the time of the ownership transfer, allowing you to reuse your VA benefits on a future home.
In cases where a non-military borrower is assuming your loan, the VA will not restore your entitlement until the home is sold and the loan is paid in full.
You’ll also want to ensure your lender formally releases you from liability as part of the assumption process. Without this release, your credit could be negatively affected if the assuming borrower misses payments.
Should You Consider a VA Loan Assumption as a Buyer or Seller?
VA loan assumptions can offer meaningful savings and strategic advantages for both buyers and sellers — especially when current rates are well above those on existing VA loans.
As a seller, do your research before committing to this route, and make sure you understand the entitlement implications.
As a buyer, start by contacting the loan servicer to confirm the assumption is possible, then work with a lender experienced in VA loan assumptions to guide you through the process.
Already have a home with a VA loan and thinking about your next move? Whether you’re looking to refinance into a lower rate or tap your home equity, Refi.com can help you explore your options. Start your application today and see what’s possible.
