VA Loan Assumption

VA loan assumption is a unique benefit that allows a borrower to take over the terms of an existing VA loan, including the interest rate and remaining loan balance.

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A benefit of being a veteran is that when you buy a home, you’re eligible for VA home loans, which require no down payments or costly private mortgage insurance, typically have lower interest rates and have more flexible credit and debt-to-income requirements. But the advantages don’t end with the purchase.

A lesser-known benefit of VA loans is that they’re assumable. That can be a selling point when you eventually put that property on the market.

A VA loan assumption means a buyer takes on the benefits and responsibility of an existing VA loan, including the (possibly lower) interest rate, monthly payment and balance, and other incentives.

Requirements for VA Loan Assumption

Being a veteran isn’t necessary for assuming a VA loan, but there are requirements that everyone must meet.

  • The seller must be current on the VA loan.
  • The buyer’s credit and income requirements include a minimum credit score (typically 620) and a debt-to-income ratio less than 41%. DTI ratio is how much debt you pay each month compared to how much money you earn.
  • The buyer must take on all mortgage obligations.
  • The closing fee must be paid either by the buyer or the seller, and the processing fee must be paid in advance.
  • The buyer must have sufficient residual income, which is the amount of money left over each month after paying for housing and existing debts.

How VA Loan Assumption Affects Buyers

Just as there are pros and cons for taking out VA loans, the same applies to assuming one.


  • You will likely get a lower interest rate. Lower rates are one of the VA loan benefits so attractive to veterans, so there’s a good chance an assumption will provide a lower rate than you can get elsewhere. The current average mortgage interest rate is 7%; depending on when a VA loan was taken out, it might be as low as 3%. That means a VA loan assumption could lower your monthly costs by hundreds of dollars.
  • The funding fee for a VA loan assumption is only 0.5% of the loan amount – again considerably less than most conventional mortgage closing costs. Take note: Veterans or surviving spouses might be excluded from the closing fee if they receive a pension, suffer from a service-related disability or are the surviving spouse of a deceased veteran who died of a service-related cause.
  • There are no appraisal fees.
  • There are no fees for paying off a VA loan early because VA regulations forbid lenders from charging them.


  • Assuming a VA loan only covers what is owed on the mortgage, not the full sales price. You also must pay for the equity the seller has in the home. Depending on how long the seller has owned the home or how its value has changed, that could be a significant amount of money. If you can’t pay that in cash, you’ll need secondary financing to cover the cost, and that will figure into the debt-to-income ratio needed to qualify to assume the VA loan.
  • VA loan assumptions can only be used for a primary residence, not for a vacation home or an investment property.

How VA Loan Assumptions Affects Sellers

Buyers aren’t the only ones who need to assess the positives and negatives of VA loan assumptions. In addition to being current on mortgage payments when the transaction occurs, sellers should weigh several considerations.


  • An obvious advantage for sellers is that being open to a VA loan assumption increases the number of potential buyers, especially if your interest rate is lower.
  • If a veteran assumes your VA loan, you regain the ability to borrow again through the VA with no limits on loans over $144,000. Called “full restoration of entitlement,” this means that you won’t have to make a down payment. Also, if you default on a loan over $144,000, the VA will pay the lender up to 25% of the loan amount.


  • To get the full restoration of entitlement when another veteran assumes your VA loan, you must ask them to substitute their entitlement for yours on that mortgage. Otherwise, the entitlement you used to buy the home will be unavailable to you until the loan is completely repaid. That means you won’t be able to get a VA loan with 0% down, and you may not have enough entitlement to get a loan at all.
  • If a non-veteran assumes your VA loan, the seller loses the remaining VA entitlement.
  • The seller may be on the hook for attorney’s or real estate brokerage fees because VA rules protect buyers from paying them.
  • Sellers must obtain a release of liability from their lender before closing the sale to protect their credit score if the party assuming the loan defaults.

How To Assume a VA Loan

There are two ways to assume a VA loan. Veterans, active military service members, members of the National Guard, reservists and surviving spouses who are eligible for VA loans can do so if they are willing to substitute their eligibility for the seller’s eligibility. So can non-veterans if they meet VA credit and mortgage payment requirements.

VA Loan Assumption Fees

The funding fee for a VA loan assumption is 0.5%, which is quite a deal. The typical fee for a first-time buyer is 2.15%. You must pay the fee within 15 days of assuming the loan.

Lenders can also charge a fee up to $300 plus the cost of a credit report.

Frequently Asked Questions About VA Loan Assumption

There are several questions those interested in VA loan assumptions commonly ask.

Can Civilians (Non-Veterans) Assume a VA Loan?

Yes, as long as the buyer meets certain requirements:

  • Buyers must agree to take over all the liabilities associated with the mortgage.
  • Buyers must agree to pay 0.5% of the loan balance as the funding fee.
  • Buyers must have a 12-month history of on-time mortgage payments.
  • Buyers must meet all the lender’s income and credit requirements.
  • Buyers’ debt-to-income ratio must be less than 41%.
  • Buyers must have enough residual income.

How Does VA Loan Assumption Work During a Divorce?

Selling a home isn’t the only time VA loan assumptions may be used. If the homeowners are divorcing, one spouse may allow the other spouse to assume the loan.

If both spouses were jointly liable on the loan, the veteran can seek a release of liability that allows the non-veteran spouse to assume the loan. The reverse is also true: The non-veteran spouse can ask for a release of liability, leaving the veteran as the property’s only owner and the one liable for the loan.

If the spouse does not want to assume the loan, they can choose a VA loan refinance, converting the mortgage into a non-VA loan.

Who Is Exempt From the VA Loan Assumption Funding Fee?

A buyer may be exempt from the fee if they:

  • Receive (or are eligible to receive) VA compensation for a service-related disability.
  • Are a spouse of a veteran who was a prisoner of war, went missing in action, or died in the line of duty or died from a service-related condition.
  • Receive compensation for a pre-discharge disability.

How Long Does VA Loan Assumption Take?

VA loan assumptions have numerous advantages, but swiftness isn’t one of them. Assumptions average 30 to 60 days to close. To speed up the process, make sure to give the VA lender all the required information as soon as possible.

About The Author

George Morris

In his 40-plus-year newspaper career, George Morris has written about just about everything -- Super Bowls, evangelists, World War II veterans and ordinary people with extraordinary tales. His work has received multiple honors from the Society of Professional Journalists, the Louisiana-Mississippi Associated Press and the Louisiana Press Association. He avoids debt when he can and pays it off quickly when he can't, and he's only too happy to suggest how you might do the same.


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