VA Loan Assumptions

A VA loan assumption is when a buyer takes over the seller's existing VA-backed mortgage. Instead of getting a brand-new loan at today's interest rate, the buyer steps into the seller's loan — keeping the original rate, remaining balance, and repayment schedule.

All VA loans originated after March 1, 1988 are assumable, but the buyer must be approved by the lender and the VA. Loans originated before that date may be freely assumable without lender approval, depending on the original loan terms.

An assumption is not a new loan — it is a transfer of the existing loan from one borrower to another. The loan stays on the same terms; only the person responsible for making payments changes.

About 74% of VA homeowners currently hold interest rates below 5%. In a market where new mortgage rates are significantly higher, assuming an existing low-rate VA loan can save a buyer a substantial amount of money every month.

Example: The Monthly Savings

Consider a home with a $400,000 remaining loan balance:

That is nearly $1,000 per month in savings — or about $12,000 per year — just by assuming the existing loan instead of getting a new one.

The Equity Gap

The buyer only assumes the remaining loan balance, not the full sale price. The difference between the sale price and the remaining balance is called the equity gap. The buyer must cover this gap with cash at closing or by obtaining a second loan (such as a home equity loan or personal loan). For example, if the home sells for $550,000 but the remaining VA loan balance is $400,000, the buyer needs $150,000 to cover the equity gap.

The assumption process follows a defined sequence. It generally takes longer than a standard home purchase because many loan servicers handle assumptions infrequently.

1. Buyer applies to the current loan servicer using VA Form 26-6381 (Request for Change of Loan Terms). The buyer submits the same financial documentation required for a standard purchase loan — income verification, credit check, and related documents.
2. Servicer underwrites the buyer. The servicer reviews the buyer's creditworthiness and ability to make the monthly payments, just like a regular mortgage application.
3. Servicers with automatic authority must issue a decision within 45 days of receiving a complete application.
4. Servicers without automatic authority must submit the application to the VA within 35 days for a decision.
5. The loan must be current at closing. All payments must be up to date — a delinquent loan cannot be assumed.
6. After closing, the servicer sends the complete closing package to the VA within 45 days.

Overall, assumptions typically have lower fees and closing costs than a traditional VA purchase loan because no new loan origination is involved.

Anyone can assume a VA loan — the buyer does not need to be a veteran or have VA loan eligibility. However, the buyer must meet the lender's standard credit and income requirements, just like any other mortgage applicant.

While non-veterans can assume VA loans, whether the buyer is a veteran matters significantly for the seller's VA entitlement (explained in the next section).

This is the most important consideration for any veteran selling a home through a loan assumption. Your VA entitlement — the amount the VA guarantees on your behalf — may remain tied to the assumed loan even after you no longer own the home.

Three Scenarios

• Buyer is a veteran who substitutes their own entitlement: The seller's entitlement is restored immediately. The seller can use their full entitlement for a new VA loan on another home. This is the best outcome for the seller.
• Buyer is a non-veteran (or a veteran who does not substitute entitlement): The seller's entitlement stays tied to that loan until the buyer pays it off in full. The seller cannot use that portion of their entitlement for another VA loan.
• Buyer defaults on the assumed loan: The seller's entitlement is not restored until the VA's loss is fully repaid — even if the seller was released from personal liability.

Bottom line: If you are selling through a loan assumption, you should strongly prefer a veteran buyer who is willing to substitute their own VA entitlement for yours. This protects your ability to use your VA loan benefit again in the future.

The VA funding fee for a loan assumption is 0.5% of the existing loan balance. This is one of the lowest funding fee rates in the VA loan program.

• The funding fee cannot be financed into the assumed loan — it must be paid at closing or within 15 days through the VA Funding Fee Payment System (FFPS)
• Exempt buyers: Veterans with a service-connected disability rating, surviving spouses receiving Dependency and Indemnity Compensation (DIC), and Purple Heart recipients are exempt from the funding fee

On a $400,000 loan balance, the 0.5% funding fee comes to $2,000 — significantly less than the funding fee on a new VA purchase loan.

When a VA loan is assumed, the original borrower (seller) should request a release from personal liability. This request is part of VA Form 26-6381, the same form used to process the assumption.

Without a release: The original borrower may remain personally liable for the loan even after selling the home. If the buyer stops making payments and the loan goes into default, the VA could pursue the original borrower for the loss.

No new appraisal is required for a VA loan assumption. The lender evaluates the buyer's ability to repay the loan but does not need to reassess the property's value.

• Long processing times: Many loan servicers process very few assumptions, so they may be unfamiliar with the procedure. Expect timelines of 45 days or longer — sometimes significantly longer. Build extra time into your purchase timeline.
• Equity gap coverage: The buyer must come up with the difference between the sale price and the remaining loan balance. On homes with significant equity, this can be a large amount of cash. Some buyers use a second loan to bridge the gap, but not all lenders offer this.
• Entitlement risk for the seller: If the buyer is not a veteran (or is a veteran who does not substitute entitlement), the seller's VA entitlement stays tied to the assumed loan. This limits the seller's ability to use their VA benefit for a future home purchase.
• Seller liability without release: Always ensure the release from personal liability is included in the assumption paperwork. Without it, the seller remains on the hook if the buyer defaults.
• Servicer cooperation: While servicers are required to process assumptions, some may not be familiar with the process or may be slow to respond. Be persistent and keep records of all communications.

• VA Home Loan Types — Overview of all VA loan programs including assumptions
• VA Home Loans Program — General information on VA-backed home loans
• VA Housing Assistance — Main VA housing assistance page