The pros and cons of a VA loan

Message from MilitaryBy Owner

Those interested in real estate continue to watch the slow rise in loan interest rates. For now, rates remain competitive, but lending experts expect interest rates to rise in the coming months. Assuming that a VA loan could become an attractive option in the near future for both buyers and sellers of military houses.

Before we dive into the pros and cons of a VA loan, here’s a quick reminder of what a VA loan hypothesis is and who is eligible.

  • Assuming that a VA loan is equivalent to taking over a homeowner’s mortgage without going through the long and expensive process of applying for a new mortgage. There is some paperwork, but it’s specially designed for a VA loan hypothesis.
  • VA loan coverage is not limited to active duty members and veterans. Anyone that the lender deems qualified to assume the payment amount is eligible to assume the loan.

Depending on whether you are the buyer or the seller of the home, there are reasons both for and against accepting a VA loan. Buyers should carefully consider all loan options because assuming a VA loan may not work in your favor. It is highly recommended that you consult a loan specialist with experience in VA loan support.


  • If the VA loan is assumable, it negates the need to apply for a new loan. The buyer can avoid paying closing costs and appraisal fees, possibly saving thousands of dollars.
  • A first VA loan user pays an average financing fee of 2.15% VA, a second VA loan user pays even more, but the VA only charges a financing fee of 0.5% on the loan amount for support, which is much less than the other costs.
  • If the original VA loan was approved at a very low interest rate, there is a good chance that a new loan would have a higher interest rate. For example, if the loan was established with a fixed rate of 3.31% in 2011 and in 2018 the best VA loan interest rate is 4.30%, it is easy to see the savings. ‘accumulate for the buyer.
  • VA sellers have an advantage when the above situation occurs, as the buying pool increases to include those who would consider taking on a VA loan. Sellers often market the favorable interest rate as a selling element in advertising the house.
  • VA loans assumed by seasoned buyers pose less risk to the seller because their full VA loan benefits are repaid.

The inconvenients

  • The buyer must certify that the assumption of the loan is for a primary residence only if he wishes to exchange VA housing rights with the seller.
  • If a civilian buyer assumes the VA loan, the remaining portion of the seller’s VA entitlement in use remains with the original loan. The veteran cannot recover the remaining eligibility until the loan is repaid. This makes a short sale or civil owner foreclosure something to consider, as the veteran owner loses that part of their advantage.
  • Lenders are not required to make a VA loan assumption.
  • Some lenders do not automatically have the authority to assume VA loans. They must send all requests for review by a VA loan office, and anyone involved in the sale of the home is subject to waiting for the VA’s response.
  • Seasoned buyers looking to take out a loan may have to pay an unusually large down payment. If the current veteran homeowner sells his home for more money than he owes on the loan, VA loan takers should make up the difference for a down payment. Looked:
    • Sale price $ 400,000
    • VA mortgage balance $ 325,000
    • Down payment required $ 75,000

Remember that avoiding a large down payment is often one of the main reasons Veterans use their housing allowance.

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For more information on the down payments and equity associated with a VA loan assumption, read on. 4 common questions about assuming a VA home loan.

After the take-over process is complete, it is important that the original VA seller obtains their Liability Release form. This document ensures that the seller is not responsible for the original loan in the future and that the original loan terms are passed on to the buyer.

Taking over the VA loan is just one of the many options available to homebuyers today. The hunt for a home purchase should always begin with a lot of research on topics such as location and affordability, finances, and home ownership responsibilities. MilitaryByOwner is the leading provider of real estate resources related to military life.

Remember the current interest rates

One of the most compelling reasons for not taking on an existing VA loan is that, for many, the current interest rate environment is much more attractive than the terms of an existing loan. Before taking out a loan, you must compare its terms with the prevailing rates. We provide up to five quotes from competing lenders with no obligation and no credit check. You can save a lot more by getting a new loan rather than taking on an older loan with a higher interest rate.

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