With higher interest rates in the current market buyers might consider finding a home with a VA Assumable loan. Assuming a VA loan allows a buyer to take over the mortgage of the current VA loan of the homeowner in order to get a lower interest rate and lower monthly payment. There are many homes on the market with interest rates ranging from 4% down to 2.5% making these homes very attractive to buyers looking to have lower monthly house payments.
VA loans assumed by veteran buyers hold less risk for the seller because their full VA loan benefits are returned to the seller. If a non VA buyer assumes the VA loan, the remaining seller's VA entitlements stays with the original loan and the veteran cannot use the remaining edibility until the loan is paid off. The seller should obtain their Release of Liability form when allowing another Veteran to assume their current loan. This form ensures the seller is not liable for the original loan.
Veteran buyers might have to come up with a large down payment to cover the difference between the purchase amount and the assumable loan amount. When looking for homes with VA loans be sure to ask what the current loan balance and interest rate is on the home.
Example:
Sales Price $500,000
VA Mortgage Balance 450,000
Down Payment Needed $50,000
VA Assumable Interest Rate 2.5% vs current rate 6.2%
When looking for homes ask your real estate professional if the home has a VA assumable loan giving you the opportunity to have a lower house payment.
