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Decide whether an assumption belongs in your strategy

An assumable loan can be a feature. It is never a promise.

7 minute read

Feature, not promise

  • An assumable VA loan can attract buyers, but the buyer must still qualify and be approved by the servicer under current VA requirements.

Source: VA Circular 26-23-10: VA Assumption Updates; VA Form 26-8978: Rights of VA Loan Borrowers

Three separate things

  • Approval of the buyer, your release of liability and substitution of entitlement are separate. Confirm each with the servicer, in writing.
  • Before closing you will be asked to sign an acknowledgment about your entitlement. Read it before you agree.

Source: VA Circular 26-23-10: VA Assumption Updates; VA Circular 26-23-27: Noncompliance in Processing Assumptions; VA Form 26-10291: Assumption Entitlement Acknowledgment; VA Circular 26-24-9: Assumption Entitlement Acknowledgement form

The equity gap

  • A buyer assumes the loan balance, not the price. The difference has to be covered.
  • A second loan is not prohibited in principle, but it must stay behind the VA loan and meet servicer and VA requirements.

Source: VA Circular 26-24-17: Secondary Borrowing on Assumption Transactions; VA Form 26-10291: Assumption Entitlement Acknowledgment

Sources

Official material this lesson draws on. Vanguard's explanation is educational; current official requirements govern.