VA loan types permit assumption of ownership. The loan must meet the following criteria to be eligible for an assumption:
- Must be current on monthly payments or brought current at the closing of the sales transaction
- New borrower must be credit worthy and able to credit qualify based on VA guidelines – this releases the current borrower from liability to VA for any loss that may occur because of a future default and subsequent claim payment
- New borrower agrees to assume all loan obligations
Some servicers/subservicers are granted automatic authority to approve assumptions by the VA while other servicers/subservicers must submit the request to the VA for review and approval prior to proceeding with the assumption transaction.
Customers must work directly with their current servicer/subservicer.
The new borrower is required to pay a funding fee in the amount of 0.50% of the loan balance as of the date of the transfer of ownership.
New borrowers are exempt from paying the funding fee if they are:
- a veteran receiving compensation for a service-related disability
- a veteran eligible to receive compensation for a service-related disability
- a veteran receiving compensation for a pre-discharge disability
- a surviving spouse of a veteran who died while in active service or from a service-related disability
A processing fee may be assessed. The amount of this fee is dependent upon if the servicer/subservicer is granted automatic authority to approve assumptions.
- Automatic authority: $300.00 plus the cost of a credit report
- No automatic authority: $250.00 plus the cost of a credit report
Note: Other servicer/subservicer fees may apply, and applicable State laws may impact the maximum dollar amount that may be assessed for these fees.
The original veteran borrower may wish to be able to obtain a future VA guaranteed loan. They may request their entitlement restored when:
- New borrower is an eligible veteran with sufficient entitlement to substitute for that of the original veteran borrower
- New borrower certifies the property will be owner occupied
- New borrower completes the Substitution of Entitlement Form
Assumptions are subject to terms disclosed in the loan documents, and processes and requirements may vary by servicer.