Our sincere thanks to Susan Kinsey for contributing this very important information!
Your VA Mortgaged Home Can Be Sold “by Assumption”
Why would you consider this little used method of selling your home? If you have a low interest VA loan, as interest rates continue to rise, a purchaser in a strong cash position may essentially “assume” that low rate and low loan payments, and the loan balance, instead of financing the home at the current higher interest rates. If agreement is made between you and the buyer on a cash amount for the assumption, it might be the best method of getting your equity out of your house while the buyer benefits from “the lower than market rates and loan payments.” A classic win / win.
Really? Can this be done? Yes, but it isn’t done often. For starters, the VA loan assumption feature is not something well known nor understood. For the past decade it has rarely made sense for purchasers as they could obtain financing in the 3% range. However in a rising interest rate assuming low rate VA mortgages may become more prevalent and even be a selling feature of your home.
Can anyone assume a VA loan? Yes. Even a financially qualified non-veteran may assume a VA loan from the current holder and also relieve the current seller of any financial obligation in the event of a default.
Can the seller then obtain another VA Loan for a home purchase? Yes, if the purchaser is a veteran who can “substitute” his / her eligibility for the purchase. If the purchaser is not eligible for a VA loan, while they can assume the loan, the seller’s eligibility remains attached to the loan and the seller is not eligible for a new VA loan. Under some circumstances where the seller did not use all of their eligibility to purchase the house, they may have some amount eligibility remaining.
Can an “assuming” purchaser borrow additional funds to make the purchase? The VA prohibits adding principal to the original loan balance during an assumption. If qualified a purchaser could take out a second trust, or equity line of credit, to complete the transaction.
How does this process work? Generally, the buyer must financially qualify with the loan holder. The loan servicer will coordinate the process with the seller and the VA.
Finally – this is the big picture. If you have questions concerning the details, call or email me.
Wishing all of our Veterans and Active Military Members and Their Families a Very Pleasant Independence Day Holiday.
Mortgage Loan Specialist
1800 Robert Fulton Dr, 3rd Floor, Reston VA 20191
(Cell) 571-283-1337 | (Main) 703-871-1300
Corporate NMLS 408540