VA loans can be assumed by non-veterans

[Anna Strausbaugh]

I just learned this today, VA loans can be assumed by non-military buyers! This is exciting news to me and I'm surprised I hadn't heard it before since my husband is a veteran and we've purchased several homes VA as well as clients of mine that I have helped. I knew VA loans were assumable, but I had always heard it was only by another person who was VA eligible. I even had a lender tell me today that isn't true, but after more research and finding a lender who does a TON of VA loans and is super knowledgeable on the subject, I learned it is possible! The catch is that the veteran can't then use their VA loan again until that house is sold or refinanced (so basically you have to go conventional in the future, at least for a while). That's only if it's a non-veteran assuming it. If it's a Veteran assuming the loan then that doesn't apply.

Our market is changing and we need to find new ways to make deals work. Assumable loans haven't been talked about much in recent years because interest rates were so low there was no point in going through the process. But now if you can find a property with an assumable VA (or FHA) loan then you can also assume their interest rate. I started looking into this because my husband and I are selling our primary residence and we have a VA loan on it and I have been thinking of more ways to attract buyers to our property. We tried offering seller financing, money toward buying down someones rate, etc. But we have a 2.25% interest rate on this house that would cost a lot to try to buy down to that rate in today's market.

Just something to think about as you are looking at properties, maybe ask the seller or listing agent if it is possibly a VA loan and how you might be able to make a deal if they have a great rate already. Good luck!

[Chris Mason]

Quote from @Anna Strausbaugh:

I just learned this today, VA loans can be assumed by non-military buyers! This is exciting news to me and I'm surprised I hadn't heard it before since my husband is a veteran and we've purchased several homes VA as well as clients of mine that I have helped. I knew VA loans were assumable, but I had always heard it was only by another person who was VA eligible. I even had a lender tell me today that isn't true, but after more research and finding a lender who does a TON of VA loans and is super knowledgeable on the subject, I learned it is possible! The catch is that the veteran can't then use their VA loan again until that house is sold or refinanced (so basically you have to go conventional in the future, at least for a while). That's only if it's a non-veteran assuming it. If it's a Veteran assuming the loan then that doesn't apply.

Our market is changing and we need to find new ways to make deals work. Assumable loans haven't been talked about much in recent years because interest rates were so low there was no point in going through the process. But now if you can find a property with an assumable VA (or FHA) loan then you can also assume their interest rate. I started looking into this because my husband and I are selling our primary residence and we have a VA loan on it and I have been thinking of more ways to attract buyers to our property. We tried offering seller financing, money toward buying down someones rate, etc. But we have a 2.25% interest rate on this house that would cost a lot to try to buy down to that rate in today's market.

Just something to think about as you are looking at properties, maybe ask the seller or listing agent if it is possibly a VA loan and how you might be able to make a deal if they have a great rate already. Good luck!

That's an interesting angle, most important thing is that the seller/veteran understands (as yours does) that while that VA loan entitlement amount is tied up in the house they sold, they can't use it again. And if that entitlement is tied up with someone else that's sitting pretty at 2.25%, you must assume it'll never be refinanced or paid off, so that's it for your lifetime VA loan entitlement.

It's also a niche buyer, to be sure. They get to assume the in-place interest rate, they're also assuming the in-place loan balance. So if you're looking to sell for $500k and have an in-place $225k VA loan that's going to be assumed, they need to have $275k to put down, unless you want to carry a note (I see that light bulb that just lit up over your head, OP :P ).

Pragmatically, I don't think this is for buyers or buyer's agents to ask about, that would be throwing spaghetti at the wall, unless maybe the home is in a military base town. More realistically, if there's a veteran willing to give up re-using their VA loan entitlement amount in exchange for top dollar on the sales price, that's for the listing agent to proactively put in the listing description, and have a stock flier/email to send back when inquiring buyers/agents ask. And if the veteran/seller isn't willing to carry a note and moonlight as a mortgage loan servicer, very quickly/aggressively filter out people who do not have substantial down payments (sales price - current loan balance = minimum down payment).

In terms of timeline, don't plan for it to be a fast process, your rockstar local loan officer will not be processing the assumption, it'll be a group of call center people reading scripts from a computer screen. If you get a single or primary point of contact, call that a win and count yourself lucky. 

Good luck. :)