Pros & Cons of Assuming a VA Loan

by Tony Carter, Realtor® 04/30/2023

Assuming a loan allows you to take over the mortgage of another homeowner. Doing so allows you to skip the long, expensive process of applying for a brand new mortgage. While there's still paperwork involved, it can be a very convenient option. Assuming a VA loan has its own set of specific pros and cons for military buyers and sellers. Here are some of the major pros and cons:

VA Loan Assumption Pros

No Need to Apply for a New Loan

Applying for a new loan takes time and money. Even without a down payment, you'll need to pay closing costs, appraisal fees and other miscellaneous expenses as part of the process. However, when assuming a loan, you skip the application process--and the associated costs.

Keep a Lower Interest Rate

By assuming an existing VA loan, you might get a much lower interest rate than you would applying for a new one. Even a percentage difference in interest rate can mean thousands of dollars saved over the lifetime of the mortgage, so the opportunity to keep an older, more favorable rate is worth considering.

Lower Funding Fee for Assumption

VA loans are free of down payments but come with funding fees. These fees can cost an average of 2% of the purchase price for a first-time applicant. If you've had a VA loan in the past, you may have to pay a higher rate for the second one. Luckily, loan assumptions come with a much lower funding fee, often as low as 0.05%.

VA Loan Assumption Cons

Possible Down Payment Requirement

If the current veteran owner sells their home for a higher price than the amount of the loan, you as the assumer have to make up the difference. For example, if the home sells for $400,000 but the loan amount is only $325,000, assuming the loan makes you responsible for a $75,000 down payment.

Primary Residence Only

The key disadvantage to VA loans is that they're reserved for primary residences. If you want to buy a vacation home or other investment property, you'll need to apply for a brand new conventional loan rather than assume a VA loan.

Whether assuming a VA loan is the right decision for you comes down to your preferences and unique financial situation. Keep these pros and cons in mind to help you find the best solution.

About the Author

Tony Carter, Realtor®

My wife, Cindy and I, moved to Florida 9 years ago from Wisconsin, where we were born and raised. I proudly served in the United States Air Force and was stationed overseas and in The Gulf War. Became a member of The American Legion and a lifetime member of Veterans of Foreign Wars (VFW). After, the Military, I got into the retail business for the last 25 years. During my last position, in the retail. I was second-in-charge of a 125 million dollar a year business. Thatis where I developed my passion for customer service and taking care of the customer. With that passion, I became a full-time licensed Realtor in the state of Florida. I understand that real estate is not just a transaction but an important personal decision, a decision that may need guidance. I am here to answer any questions and guide you and your family through the process. Whether buying for the first time. Purchasing a condo, single-family home, investment property or a time-share on the beach. I am the exclusive Realtor for the Mariner Beach Club in St Pete Beach, Florida and for the Island Gulf Resort in Madeira Beach, Florida. Please feel free to contact me with your real estate needs directly at cell 262-894-8135 or via e-mail at [email protected] or website; Timeshare on St. Pete Beach, Florida. Video of the Mariner Beach Club, St. Pete Beach, Florida. Website to the timeshare at Madeira Beach, Florida.