When it comes to obtaining a mortgage, veterans and active-duty service members have a unique advantage in the form of VA loans. These loans not only provide favorable terms and benefits for the borrowers but can also offer an often overlooked opportunity for sellers. In this blog post, we'll explore the concept of assumable VA loans and how they can present a competitive edge for both buyers and sellers in the current housing market.

Understanding Assumable VA Loans: An assumable loan is a mortgage that allows a new borrower to take over the existing loan terms and payments from the original borrower. In the context of VA loans, assumability means that when a home is sold, the buyer can assume the seller's VA loan instead of obtaining a new mortgage. This presents a significant advantage for both parties involved.

Advantages for Buyers:

  1. Low Interest Rates: One of the primary advantages of assuming a VA loan is the potential to acquire a low-interest rate. If the original loan was secured at a time when interest rates were lower, the buyer can assume the loan at the same favorable rate, even when the current market rates are higher. This can result in substantial savings over the life of the loan.

  2. Easier Qualification: Assuming a VA loan can be an easier process than applying for a new loan from scratch. Buyers don't need to meet the stringent credit and income requirements that come with traditional mortgage applications. As long as the buyer meets the eligibility criteria set by the Department of Veterans Affairs, assuming the VA loan can be a streamlined and efficient option.

  3. Lower Transaction Costs:  Since the buyer will be assuming the existing loan, there is no need for loan origination fees, appraisals, or other closing costs that would be incurred with a new mortgage. This can result in a significant cost savings for the buyer.

Advantages for Sellers:

  1. Increased Marketability: By advertising a home with an assumable VA loan, sellers can attract a larger pool of potential buyers. In a competitive housing market, offering assumable financing can set a property apart from others and make it more desirable. This can lead to faster sales and potentially higher selling prices.

  2. Lower Transaction Costs: Sellers who have an assumable VA loan can save on transaction costs typically associated with selling a home. 

Important Considerations:

  1. Assumption Approval: It's important to note that not all VA loans are assumable. The loan must have a specific provision allowing assumptions, and the buyer must meet the VA's eligibility requirements. Additionally, the lender needs to approve the assumption, ensuring that the buyer has the financial capacity to take on the loan.

  2. Release of Liability: Sellers should be aware that when their loan is assumed, they may still retain some level of liability for the loan. It's crucial to consult with a real estate attorney or financial advisor to understand the legal and financial implications involved in releasing liability and transferring the loan to the new buyer.

 Assumable VA loans provide a remarkable opportunity for both buyers and sellers in the current housing market. Buyers can secure low-interest rates and enjoy an easier qualification process, while sellers gain a competitive edge by offering assumable financing and attracting more potential buyers. If you're a veteran or active-duty service member considering a home purchase or sale, exploring the benefits of assumable VA loans is a worthwhile endeavor. Take advantage of this unique feature of VA loans and leverage it to make the most of your real estate transactions.

If you think you might qualify I would love to connect you with a VA loan expert! Call me for a confidential conversation. Stephanie Bredahl, Wardman Residential; M: 202.821.5145; [email protected] 

Work With Stephanie

Stephanie has worked with clients in all price ranges and has successfully executed many complex transactions.