Assuming VA Loan With New Home Purchase For Veterans

Assuming VA Loan With New Home Purchase For Veterans

Assuming VA Loan With New Home Purchase For Veterans

If you have never heard about ways you can Assume VA Loan or any existing mortgage for that matter, then this is definitely the article for you as we are going to take a look at how you can do this and you will see the benefits if this is offered to you.

  • If there is a little-known fact when selling your home, especially when mortgage rates are on the rise it is offering someone the ability to assume your mortgage. 
  • When a potential buyer goes about assuming your mortgage what they are doing is taking over your mortgage from its current state. 
  • This means that if you are 5 years into a 30 year loan, you are going to assume a mortgage that is for 25 years. 
  • In that 5 year time span the current borrower paid a lot of money in interest and also put a small dent into the principal of the loan. 
  • When you are looking at the amortization of a mortgage at $200,000 and a 4% mortgage rate, for the first 5 years 63-69% of the payment is allocated to just interest which equates to over $35,000 paid in interest and $20,000 against the principal leaving about $180,000 on the loan.

What can be an even better option for you when trying to assume a mortgage is to Assume VA Loan as we have determined to have some of the best mortgage rates and guidelines around.

  • Just because a veteran borrower wants to Assume  VA Loan doesn’t mean they can automatically get it because they want to.

The fact of the matter is they are going to have to go through the approval process through 2 of the following ways in order to start the loan assumption:

  1. The home buyer will need to go through the approval process with the current lender as if this is for a new VA Loan. 
  2. Everything will be identical to a newly originated VA Loan except for the fact that there won’t be a Certificate of Eligibility as the buyer doesn’t need to be a veteran.
  3. The home buyer is already a veteran who has their Honorable Discharge and Certificate of Eligibility and would like to go through with using their available VA benefits in order to purchase this home.

No matter which way you try to Assume VA Loan the lender is always going to have to qualify you as if you are a new borrower requesting a new loan.
Now depending on who is servicing the loan will also determine how quickly this mortgage can be assumed.

If the current servicer does not have the automatic authority to process the assumption of the loan then they are going to have to send it to the VA Regional Loan Center for approval and processing which can take up to a month.  However, if the current servicer does have automatic authority there is no delay in the closing of this loan as the VA does not need to give their approval to move forward with the assumption.

Assume VA Loan: Additional Requirements By Lenders
Assume VA Loan: Additional Requirements By Lenders

Now to go along with the assumption of a VA Loan, the home buyer and current borrower will need to ensure the following conditions are met at the time of the closing.  There isn’t much wiggle room with regards to these requirements so everyone must be on the ball from all sides of the transaction or it is not going to take place which can jeopardize the sale of the home.

  • As mentioned above the borrower must qualify for the new loan under VA Guidelines.
  • The existing loan must be current without late payments and if there are late payments, these will need to be paid and brought current prior to the closing.
  • There is a 0.5% funding fee associated with the VA Loan assumption and either the existing owner or new owner will be required to pay for this prior to closing.
  • There are also processing fees which will be required in your closing costs for this loan just like a new VA Loan would have.

Assume VA Loan: VA Loans Are Great
Assume VA Loan: VA Loans Are Great

It cannot be said how truly great VA Loans are and if it is ever possible for you to Assume A VA Loan you will not be disappointed with the outcome what so ever. 
It is worth noting the VA Guidelines associated with these loans so you can see for yourself if you qualify for a VA Loan and if you would be eligible to Assume A VA Loan.

  • Credit Score: According to VA Guidelines there is not a minimum FICO credit score that needs to be had in order to obtain a VA Loan but all lenders will have a minimum that they will lend to.  Most lenders will require a 620+ FICO, however at Loan Consultants we can go as low as 580 FICO.
  • Debt to Income Ratio: There also isn’t set requirements with regards to Debt to Income Ratios.  Given this it is also left up to the lenders to determine what DTI Ratio they are willing to lend to and at Loan Consultants that ratio can go all the way up to 60%.
  • Waiting Periods After Derogatory Event: VA Loans have some of the shortest mandatory waiting periods after a derogatory event you will ever see and they are as follows:
    • Chapter 7 Bankruptcy: 2 Years after discharge date
    • Chapter 13 Bankruptcy: No waiting period with trustee approval and at least 12 on time payments to your currently arranged payment plan
    • Short Sale: 2 Years after the recorded or settlement date
    • Deed in Lieu of Foreclosure: 2 Years after the recorded or sheriff’s sale date
    • Foreclosure: 2 Years after recorded or sheriff’s sale date

Assume VA Loan: Conclusion

If you are ever approached with the opportunity to Assume VA Loan you should jump at that chance immediately and without question.  With VA Loans having some of the lowest mortgage rates around there is no wonder why you wouldn’t want to take advantage of this.  Add on top of the great loan you are getting is the assumption aspect which allows you to take advantage of the current borrower’s payments they have already made.  For the amount of time they have had the loan they have been paying interest and paying down the principal to your benefit.  If you’d like additional information on how to Assume A VA Loan please reach out Loan Consultants at 844-275-2007.I look forward to hearing from you soon!


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