Qualifying for a VA loan is a wonderful privilege, especially if you’re not in the best financial standing to get approved for a conventional loan. However, not everyone knows what it is and how it works. If you’re not familiar with its different processes, you can miss out on incredible opportunities to save on your finances. For example, not all home buyers are aware of the VA home loan assumption clause.
What Is a VA Home Loan Assumption?
Once you opt for a VA home loan to pay for a property, the future buyers can start paying your outstanding mortgage without creating a new arrangement. This makes a smoother transition of ownership while allowing your buyer to purchase the real estate from you sooner. However, this process isn’t as clear-cut and simple. This is why it’s vital to understand what VA home loan assumptions are.
In this article, we’ll share three things you should know about VA home loan assumptions.
- Compatibility with Lenders. Since different lending companies have their own policies concerning VA loans, your specific mortgage lender may not allow an assumption to future buyers. Some companies keep applications under pending lender approval to aid this process if a prospective buyer qualifies for the payment amount. Generally, anyone can assume the mortgage you currently have on a property, whether they’re qualified under the classifications of VA loans or not. This means civilians can assume your loan, allowing you to expand your buyer market.
- Necessary Prerequisites. A buyer who will assume your VA loan from you needs to take on all mortgage terms you’ve signed on with your current lender. Additionally, they need to present a 12-month history of consistent mortgage payments. Besides consistency in repayments, they must also fit your specific lender’s financial benchmarks. This includes income records, credit history, and debt-to-income ratios. The prospective buyer must also pay a funding fee of around 0.5% of the current loan balance. These are just some of the prerequisites a buyer needs to follow.
- Potential Selling Points. As a homeowner, the benefits of securing a home loan don’t just stop with your mortgage plan. Since all homes are potential investments, you need to realize the advantages of VA home loan assumptions with your marketing strategy. Although not all US citizens can qualify for a VA loan, others can reap the benefits of those who plan to sell their homes through a VA-backed mortgage plan. A buyer who wants lower interest rates can benefit from the locked rate you’re benefiting from now. If they opt to assume your loan, the buyer must follow the exact terms of your existing loan, including the years remaining and interest rates set during your initial negotiations with the lender. Additionally, the buyer won’t have to pay for an origination fee and appraisal since the property is still technically under your obligation to repay.
Although VA loans are government-backed mortgage plans, private lenders will have different restrictions and policies for applicants. While it will still maintain the clauses above, each one will have unique benefits and advantages, depending on which vendor you choose. This is why it’s necessary to look for a mortgage lender that can guide you through the process of securing a VA loan.
Apply For a VA Loans in Phoenix, AZ
At Desert Springs mortgage, our team is dedicated to helping our clients finance their dream homes. If you need a VA loan in Phoenix, AZ, our professional mortgage experts can assist you throughout the entire process. Call us today at (623) 432-1309 for all your financing concerns.