VA Loan Assumption Explained

If you acquired your house using a guaranteed mortgage loan from the VA, it is not impossible that sometime in the future you may want – or need – to sell the property. Some cases where this would be applicable include active duty military members who find themselves having a permanent change of stations, or even those people who simply want to move to a larger house in another place.

When this happens to you, you would need to take care of the sale of the house – even before your VA home loan has been completely paid off. The good news is that there may be certain situations wherein a VA loan is assumable, meaning the buyer can handle the VA loan, regardless of whether he is a civilian or military. Take note that in the past, all properties acquired through a VA loan were recognized as assumable. Now, however, the rule doesn’t automatically apply.

Do you know that there are situations wherein a veteran is allowed to sell the residential property and give permission to the seller to take over the VA mortgage?

Loan Assumption and Divorce

If the case involves a veteran home owner getting a divorce, VA will grant him what is usually referred to as an unrestricted transfer. However, it is important to remember that this only applies if the military spouse and the non-military partner are co-borrowers. In situations like this, the VA mortgage can usually be assumed, but just to be sure it is highly recommended that both parties sign a release of liability. This spells out that the co-borrower who is leaving will not be held accountable for any credit issues that may occur. When conducting an unrestricted transfer, you should remember that VA is the one to approve the transaction, not the bank.

Lastly, there may be cases when a VA home loan can be assumed, but for this to apply the loan should have been closed before March 1, 1988. In situations like this, loan assumption is then considered unrestricted, or the buyer is given permission to assume the VA loan without the need for approval from the VA or the bank.

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