When PCS orders arrive and you're facing today's high mortgage rates, every dollar counts. While most military families focus on traditional VA Loan benefits, there's a lesser-known strategy that could save you thousands: assuming an existing VA loan from another service member or veteran.
Here's how VA loan assumptions work and why they might be your smartest move in today's market.
What Is a VA Loan Assumption?
A VA loan assumption allows you to take over an existing VA mortgage from the current homeowner, inheriting their interest rate, loan balance, and payment terms. The Department of Veterans Affairs states that VA loans are assumable by qualified buyers, including non-veterans.
This means if you're buying from a fellow service member who secured a VA loan at 2.75% in 2020, you could potentially assume that rate instead of getting a new loan at today's higher rates.
Why Military Families Should Consider VA Loan Assumptions
Lock in Lower Interest Rates
The Consumer Financial Protection Bureau reports that even a 1% difference in interest rates can save homebuyers hundreds of dollars monthly. With VA loans issued between 2020-2022 carrying rates around 2-3%, assuming one of these loans could slash your monthly payments compared to current rates.
Skip Private Mortgage Insurance
Unlike conventional loans, VA loans never require PMI, regardless of your down payment. When you assume a VA loan, you maintain this benefit even if you're not a veteran yourself.
Reduced Closing Costs
VA loan assumptions typically involve fewer fees than originating a new mortgage. The main cost is the 0.5% funding fee, significantly less than traditional closing costs.
Faster Process for PCS Timelines
Military families often face tight PCS timelines. VA loan assumptions can close faster than new loan applications since much of the underwriting legwork is already complete.
How Military Homebuyers Qualify for VA Loan Assumptions
To assume a VA loan, you must meet the lender's qualification standards, which typically include:
- Credit score of 620 or higher (requirements vary by lender)
- Stable income with acceptable debt-to-income ratio
- Proof of employment or military orders
- Completion of a formal assumption application
Military OneSource recommends getting pre-qualified before house hunting to streamline the assumption process.
Understanding the Seller's VA Entitlement
When assuming a VA loan, it's important to understand how this affects the selling service member's benefits. Unless you're a veteran who can substitute your entitlement, the seller's VA loan benefit remains tied to the assumed loan.
For selling military families, this means their full VA entitlement won't be restored until the assumed loan is paid off. However, they may still have remaining entitlement for another VA loan, depending on their circumstances.
The VA Loan Assumption Process for Military Families
Step 1: Find Properties with Assumable VA Loans
Work with a VeteranPCS agent who understands military moves and can identify homes with assumable VA loans near your new duty station.
Step 2: Contact the Current Lender
Your agent will help contact the seller's lender to confirm the loan is assumable and request assumption requirements.
