Z-Real Estate

Veterans Affairs (VA) Loan Assumptions

What They Are and How They Work

Alexandria, VA – Hello Alexandrians! Happy spring – a truly amazing season in our area!

The local real estate market is fast and furious, even though mortgage interest rates are in the mid- to high-six percents at the typing of this article.

Absolutely we are currently in a seller’s market. Nothing lasts forever and the market is always fickle, fluid and fluctuating. Seasonally, we tend to experience a slowdown after Memorial Day, making for a more balanced and healthy market between buyers and sellers. This month, we are covering a subject that many homebuyers are hoping for and curious about.

While these VA Loan assumptions do exist, they are not easy to come by and due to our current seller market, many sellers will have zero interest in marketing this assumption feature. These loans can have balances with interest rates as low as 2.5 percent depending on when they were purchased.

What are sellers’ objections to offering assumability of their mortgages:

  1. The VA Loan assumption process can take 60-150+ days to close depending on the speed of the servicer holding the loan. Sellers are reticent to wait many months for their proceeds.
  2. If a non-VA buyer assumes the mortgage, the seller will lose all or a portion of their VA eligibility (eligibility dependent).

You read that correctly, a non-VA buyer can technically assume a VA Loan.

Here are some additional challenges that buyers face regarding assuming these VA Loans:

  1. If you must move in a timely fashion, waiting for the VA assumption approval process may be prohibitive. These assumptions are processed by administrative personnel, and the financial servicing company makes very little money for these assumptions. They are in no great rush to make these happen.
  2. The difference between the current mortgage balance and the agreed upon purchase price must be paid in liquid funds (cash). The VA will not allow a 2nd mortgage to be financed unless it is also assumable, and at the time of this article, there are no such loans offered in the current mortgage marketplace.

For example, if the current mortgage balance is $600,000.00, the sales price is $800,000.00, the buyer(s) would need to bring $200,000 to closing in cash.

  1. Competition can and will be fierce if a seller is offering an assumption and the listing price may escalate.
  2. The new buyer will have to maintain the exact amount of principal and interest as the current lien holder. Taxes and Insurance numbers will vary. The buyer must also pay a portion of the VA funding fee.
  3. These loans can only be assumed by the occupant and cannot be co-signed with a non-occupant.

The bottom line is that these assumptions are highly desirable and, in a more balanced market, can and will become more popular and viable.

Can we assist you in navigating your next chapter with caring and skilled representation? The Seward Group would be honored to help you, a family member, or friend with any of your real estate needs.

Article written by Lyssa Seward, Team Lead of The Seward Group at TTR Sotheby’s International Realty. The Seward Group offers full-spectrum concierge real estate service at all price points. Email: [email protected], Visit www.seward-group.com, or Call (703) 298-0562

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