Can you assume a VA loan with an entity?

Question

Have an opportunity to assume a VA loan and wondering if I HAVE to do it in my personal name, or if my entity can assume the loan. So far striking out on doing internet searches and looking on VA website.

Austyn Shuman · Answer

Hello Elliot,

Great question! Assumable VA loans are an excellent opportunity to secure favorable terms, but there are specific rules regarding who can assume these loans. Let me clarify how this works:

1. VA Loan Assumptions and Eligibility

• Assumption by Individuals: VA loans can be assumed by both veterans and non-veterans, but the assumption must generally be completed by an individual—not an entity. This is because VA loans are tied to the borrower’s personal ability to repay and require a creditworthiness review.
• VA Entitlement Consideration: If you’re assuming a VA loan, the original borrower’s VA entitlement may remain tied to the loan unless you’re a veteran eligible to substitute your own entitlement.

2. Assumption by an Entity

Unfortunately, assuming a VA loan directly through a legal entity (such as an LLC, corporation, or trust) is typically not allowed because:

• Primary Residence Requirement: VA loans are designed for owner-occupied properties, meaning the assuming borrower must intend to live in the property as their primary residence.
• Credit Review: The VA and lender require the assuming party to undergo a personal credit and income review to ensure repayment ability, which entities cannot satisfy.

3. Alternatives to Consider

If you want to involve an entity for liability protection or other reasons, here are some potential approaches:

• Assume in Personal Name and Transfer to Entity:Assume the loan in your personal name and later transfer the property title to an entity.Important: Transferring title may violate the loan’s due-on-sale clause unless explicitly allowed by the lender. Discuss this with the lender before proceeding.
• Assume the loan in your personal name and later transfer the property title to an entity.
• Important: Transferring title may violate the loan’s due-on-sale clause unless explicitly allowed by the lender. Discuss this with the lender before proceeding.
• Partnership or Joint Venture:Structure the purchase with a partner or entity while maintaining the assumption in your name.This allows you to benefit from the entity's structure while complying with VA loan rules.
• Structure the purchase with a partner or entity while maintaining the assumption in your name.
• This allows you to benefit from the entity's structure while complying with VA loan rules.
• Entity-Owned Financing:If assuming the VA loan isn’t feasible, explore refinancing into a non-VA loan owned by your entity after the property is acquired.
• If assuming the VA loan isn’t feasible, explore refinancing into a non-VA loan owned by your entity after the property is acquired.

• Assume the loan in your personal name and later transfer the property title to an entity.
• Important: Transferring title may violate the loan’s due-on-sale clause unless explicitly allowed by the lender. Discuss this with the lender before proceeding.

• Structure the purchase with a partner or entity while maintaining the assumption in your name.
• This allows you to benefit from the entity's structure while complying with VA loan rules.

• If assuming the VA loan isn’t feasible, explore refinancing into a non-VA loan owned by your entity after the property is acquired.

4. Key Steps Before Proceeding

• Contact the Loan Servicer: They will guide you through the assumption process and confirm whether an entity can participate.
• Consult an Attorney: If you’re considering title transfers or joint ventures, an attorney familiar with VA loans can help you navigate potential risks.
• Understand Due-On-Sale Clauses: Ensure any post-assumption changes comply with the loan terms to avoid triggering repayment demands.

Final Thoughts

VA loans are a unique and valuable financing tool, but the program’s focus on personal borrowers makes entity-based assumptions unlikely. Your best approach is to assume the loan in your personal name and explore legal and financial strategies to integrate your entity afterward.

Feel free to reach out with further questions—I’d be happy to help!

Best regards,

Johnny Lynum · Answer

Hey @Elliot Tan. This is a great question! I'm an active-duty military (retiring soon). I have leveraged VA loans, not for this case though. I'm curious as well and would love to see what you figure. VA loans are typically meant for individual borrowers, not businesses or entities. However, consider calling the VA’s regional loan center or speaking with a VA-approved lender who can interpret the rules in a more specific scenario tailored for you. Best of luck, brother!