The Pros and Cons of Assuming a VA Loan

Home loan interest rates rarely stay put for long, and when they start climbing, VA loan assumption tends to get more attention. This process lets a qualified buyer take over a seller’s existing VA loan, including the interest rate that came with it, instead of applying for a brand new mortgage.

Whether that’s a smart move depends on whether you’re the buyer or the seller. There are reasons both for and against assuming a VA loan, so buyers should weigh all their loan options carefully since assuming a VA loan might not work in their favor. It’s a good idea to consult a loan specialist with VA loan assumption experience from one of the best VA home loan lenders.

What Is a VA Loan Assumption?

Before getting into the pros and cons, here’s a quick overview of what a VA loan assumption is and who’s eligible:

• Assuming a VA loan means taking over a homeowner’s mortgage without going through the long, expensive process of applying for a new one. There’s still paperwork involved, but it’s designed specifically for VA loan assumptions.
• VA loan assumption isn’t limited to active duty members and veterans. Anyone the lender deems qualified to take on the payments is eligible to assume the loan.

5 Pros of Assuming a VA Loan

If you’re eligible for a VA loan assumption and you think it’s the right option for you, here are some of the advantages to consider:

1. If the VA loan is assumable, it negates the need to apply for a new loan. The buyer can avoid paying closing costs and appraisal fees, likely saving thousands of dollars.
2. A first time VA loan user pays a 2.15% VA funding fee with no down payment, a second-time VA loan user pays even more, but the VA only charges a 0.5% funding fee on the loan amount for the assumption, which is far less than the other fees.
3. If the original VA loan was approved at a very low interest rate, there’s a good chance a new loan will have a higher interest rate. For example, if the loan was established with a fixed rate of 3.31% in 2011, and in 2026 the best VA loan interest rate comes in at 6.30%, it’s easy to see the savings add up for the buyer.
4. VA sellers have an advantage when the above situation occurs, because the buying pool increases to include those who would consider assuming a VA loan. Sellers often market the beneficial interest rate as a selling feature within the house’s advertising.
5. VA loans assumed by veteran buyers hold less of a risk for the seller because their full VA loan benefits are returned.

5 Cons of Assuming a VA Loan

VA loan assumptions have several drawbacks. Here are some of the pitfalls to understand before you commit:

1. The buyer must certify that the loan assumption is for a primary residence only if they want to swap VA housing entitlements with the seller.
2. If a civilian buyer assumes the VA loan, the remaining portion of the seller’s VA entitlement in use stays with the original loan. The veteran cannot retrieve the remaining eligibility until the loan is paid off. This makes a short sale or foreclosure by the civilian owner something to consider, because the veteran owner loses that portion of their benefit.
3. Lenders are not required to issue a VA Loan assumption.
4. Some lenders do not have automatic authority to assume VA loans. They must send all requests to be reviewed by a VA loan office, and everyone involved with the home sale is subject to waiting for the VA to respond.
5. Veteran buyers who want to assume a loan could be on the hook for an exceptionally large down payment. If the current veteran owner sells their home for more money than they owe on the loan, the VA loan assumers would have to come up with the difference for a down payment.

Get a VA Loan Today

VA loan assumption is just one of many options available to home buyers today. Start your home search with plenty of research on things like location, affordability, financing, and the responsibilities of homeownership. When you’re ready to get a VA loan, you can get a personalized rate quote online.