If you are a veteran or current service member and are in the market to purchase a home, you may discover that VA mortgages offer significantly better financing terms than traditional banks. Even if you aren't eligible for a VA loan on your own, you may still be able to take advantage of these unique financing terms by assuming a VA mortgage from an individual who is selling their home.
Although it used to be commonplace for individuals to assume VA loans, new requirements have been put into place that state that buyers must meet one of two requirements in order to be legally able to assume the loan. Once this eligibility vetting is complete, you can follow a series of simple steps in order to successfully assume a VA mortgage.
A VA mortgage offers a series of unique advantages compared to traditional mortgages. Home buyers can assume a VA mortgage if they meet the specific eligibility criteria set forth by the federal government.
VA Mortgage Basics
Through a combination of highly competitive interest rates, flexible underwriting and a variety of attached amenities, VA mortgages have gained a reputation for providing some of the best financing opportunities in the industry today. Some of the unique attributes of VA loans include no required down payments, significantly reduced closing costs, and wide-ranging flexibility when it comes to applicant eligibility.
With such favorable terms, it should come as no surprise that these mortgages are only available to a select group of individuals. In order to qualify for a VA mortgage, applicants must meet one of four criteria, those being: 1.) that they have served a minimum of 181 days of active military duty during peacetime, 2.) that they have served a minimum of 90 days of active duty during a war, 3.) that they have served a minimum of six years in the US National Guard or Reserves, and 4.) that the applicant's spouse was killed during military service and the applicant has not since remarried. As long as one of these criteria is met, an individual should fully qualify for a VA mortgage.
Assuming a VA Mortgage
As mentioned previously, individuals can still assume a VA mortgage without meeting any of the four requirements discussed previously. In fact, an individual can assume a VA mortgage as long and they meet the specific financial eligibility standards provided by the VA.
These standards can be summarized in four distinct parameters, those being: 1.) that the loan in question is current and does not currently have any past due balances attached to it, 2.) the individual assuming the loan fully meets the credit and income guidelines established by the VA, 3.) a funding fee of 0.5 percent of the remaining principal balance must be paid, 4.) all processing fees must be paid by the individual assuming the loan.
If these four criteria are met, an individual can take over a VA loan managed by the original owner of the property and continue making payments until the loan is fully paid for.
Getting Started With VA Form 26-6381
Once you have found the property you wish to purchase and have confirmed that you are eligible to assume the VA loan, you must complete VA Form 26-6381. This particular document acts as an application for the assumption of the mortgage in question. Until VA Form 26-6381 is completed, an individual will not be able to legally assume the mortgage in question. Once this application has been completed, submitted and accepted, a homebuyer will have all of the necessary documentation to purchase the home and assume the mortgage.
- Most mortgage brokers and many real estate agents are familiar with executing VA assumptions, and they should be able to assist you in assuming a VA home loan from a willing seller.
Ryan Cockerham is a nationally recognized author specializing in all things innovation, business and creativity. His work has served the business, nonprofit and political community. Ryan's work has been featured at Zacks Investment Research, SFGate Home Guides, Bloomberg, HuffPost and more.