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VA Loan Assumption - Advantages, Disadvantages, Rules & Process | Know Your Benefit - YouTube
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Are you a veteran with a VA loan and
want to learn more about the VA loan
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assumption benefit and what that process
is?
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Hi, I'm Jason Skinrood, mortgage loan
officer in Salt Lake City, Utah with
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licenses in multiple states and United
States Air Force veteran.
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This video is part of my "Know Your
Benefit" series and specifically today
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we're going to be talking about the
benefit of the VA loan assumption.
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The reason why I decided to make this
video was because recently I was on a
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Zoom call with several other
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veterans who are in the real estate
business and we were talking about
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benefits of using your VA loan. The
topic that had come up was of course was
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the VA loan assumption,
First, let's talk about what the VA loan
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assumption is. That is where your
buyer, if you currently have a VA loan on
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your home and you're selling it because
you're PCS'ing, relocating or whatever other
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kind of life thing is going on for you.
You're selling it to a buyer and it
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allows them to actually take over the
existing terms of your VA loan. That
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would include the balance
and the rate which can be
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a big benefit to the buyer especially if rates have risen.
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Here I've pulled up a copy of a
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sample mortgage note that I have saved
on my computer. You can clearly see
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right here at the very top where it says
"NOTE." It says "NOTICE THIS LOAN IS NOT
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ASSUMABLE WITHOUT THE APPROVAL OF THE DEPARTMENT OF VETERAN AFFAIRS OR ITS
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AUTHORIZED AGENTS." Now this is a very big benefit that the VA has extended to us
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as veterans to be able to allow other
people and it doesn't necessarily have
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to be veterans, it can be anybody
else, as long as they can qualify. They
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can actually go ahead and assume your VA
loan. They can be a civilian or
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another veteran.
What are some of the advantages or
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benefits to the buyer who is assuming
your VA loan?
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The first is, if you have a
really low interest rate that's lower
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than what current rates are, this can be
a big benefit to them.
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It allows them to assume and
take over those existing terms. Another
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benefit is that VA loans are a lot
easier to qualify for than other types
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of financing. It does
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extend some opportunities to people that
may have a harder time qualifying or
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buying your home under conventional
financing.
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I do want to talk about some of the
disadvantages too.
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One of the things that can really limit
the buyer pool
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is if you have a lot of equity in your
home. Let's kind of cover that
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scenario briefly.
I created this scenario here to talk a
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little bit more about how the VA loan
assumption actually works in reality.
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Let's say that you purchased your home in 2019 for
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the US average home price of $384,600.
During the course of 2020
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or 2021 you refinanced with the record low
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interest rates and got a killer rate on
your VA loan.
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Now, it's a really big benefit because rates
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have increased
and you want to be able to pass that
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benefit on to a buyer.
However,
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now that you're selling your home and
at the end of 2021 the average home
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price is now $477,900.
Because your
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buyer can only assume the existing loan
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balance on your loan, there's now quite a
difference between what you owe and what
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your home is worth.
What this scenario can quite
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possibly do
is that it can really limit your buyer
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pool. Because
in theory,
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the buyer is going to have to pay you in
cash
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over $93,000!
In order to be able to assume your loan,
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they can only assume
what's currently owed on the balance of
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the loan
and not
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borrow
the full purchase price of the house.
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Next, let's talk about what that process
is for someone to assume your VA loan.
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The first thing that you're going to
want to do is contact your current
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lender so that you can know exactly what
the guidelines are in order to be able
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to
have them assume that loan.
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Also, it'll give you an idea of what the
time frame is because
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depending on your individual
circumstances,
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the assumption may just need to be
approved by the lender itself or they
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may need to get the VA involved which of
course,
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will
add some more time to the
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time frame for them to qualify.
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It can potentially take weeks for the
Regional Loan Center
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to be able to go through that approval
process with you.
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Thank you for checking out this video! If
you found that the information was
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helpful, please consider giving the video
a thumbs up and subscribe to my channel. If
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you have questions, as always be sure to
ask them down below. Check out some
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more of the videos in my "Know Your
Benefit" series so you can learn more
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about your VA loan benefit. Thank you for
watching.
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