This regularly scheduled sponsored Q&A column is written by Eli Tucker, Arlington-based Realtor and Arlington resident. Please submit your questions to him via email for response in future columns. Video summaries of some articles can be found on YouTube on the Ask Eli, Live With Jean playlist. Enjoy!
Question: Is it possible to take over a seller’s existing loan if they have a low interest rate?
Answer: Thank you to our Veterans and Active-Duty military for your service.
In keeping up with the theme of last week’s column, addressing popular mortgage product/strategies, and in honor of Veterans Day, this week I’ll cover assumable VA loans.
An assumable loan is a loan that can be transferred from a seller to a buyer, allowing the buyer to maintain the interest rate of the seller’s existing loan rather than accept a market-rate interest rate. This can be valuable in a high-interest rate environment like we’re in now when most homeowners have an interest rate well below current market rates.
To help me provide the best information about assumable VA loans, I reached out to Skip Clasper of Sandy Spring Bank ([email protected]), who I highly recommend for a range of loan products including VA loans, construction/rehab loans, and jumbo loans.
Only Some Loans Are Assumable
VA loans (available to Veterans, service members and surviving spouses), FHA loans, and USDA loans are the only traditional loan products that are assumable. They make up a relatively small percentage of existing home loans in Arlington (likely single-digit percentage of total loans). I’m not aware of any conventional loans that can be assumed.
Key Details about Assuming a VA Loan
There are some important details and caveats to assuming a VA loan that both buyers and sellers need to understand prior to transferring a loan:
- Buyers do NOT have to be a Veteran or otherwise qualify for a VA loan to assume a VA Loan.
- Sellers can NOT obtain a new VA loan until the previously assumed loan is paid off (or refinanced out of) unless the new buyer is a Veteran and uses their eligibility on the assumed loan.
- It is less expensive (closing costs) to assume a loan than to originate a new loan. The VA Funding fee is only 0.5% for assumable VA loans.
- You need a down payment that covers the gap between the assumable loan balance and the purchase price. For example, if the seller’s loan balance is $200,000 and the purchase price is $500,000, the buyer is assuming $200,000 is debt and will have to cover the remaining $300,000 via down payment or alternative debt such as a second trust.
- Buyers need to qualify for the loan using normal income, debt, and credit guidelines.
As you can probably determine from the above details, there are only a limited number of scenarios where assuming a VA loan makes sense for both parties. The biggest hurdle to VA loan assumption is that the VA loan eligibility stays with the loan so if the buyer does not have their own VA loan eligibility, the seller must be sure they are okay giving up this very valuable benefit until the new buyer pays it off or refinances.
If you’d like to discuss buying, selling, investing, or renting, don’t hesitate to reach out to me at [email protected].
If you’d like a question answered in my weekly column or to discuss buying, selling, renting, or investing, please send an email to [email protected]. To read any of my older posts, visit the blog section of my website at EliResidential.com. Call me directly at (703) 539-2529.
Video summaries of some articles can be found on YouTube on the Ask Eli, Live With Jean playlist.
Eli Tucker is a licensed Realtor in Virginia, Washington DC, and Maryland with RLAH Real Estate, 4040 N Fairfax Dr #10C Arlington VA 22203. (703) 390-9460
An alleged shooting threat briefly sent students practicing on a school field indoors tonight.
Good Wednesday evening, Arlington. Let’s take a look back at today’s stories and a look forward to tomorrow’s event calendar. 🕗 News recap The following articles were published earlier today…
(Updated at 6:35 p.m.) Black and Hispanic students remain more likely to be suspended from Arlington Public Schools than their peers, according to new data. Specifically, Black students make up…
Whether it’s T. Swift tickets, cash money, or a prime parking spot, most DMV-area residents agree that time is actually their most valuable currency. A universal experience of car owners…
At Generation Hope, we’re dedicated to supporting teen parents in college as they work toward earning their degrees. We are in need of caring child care volunteers for upcoming events on Saturday, October 21st (in Washington, DC), and Saturday, November 4th (in Arlington, VA). Join our growing volunteer community and support us at an event this fall!
At all of our events, we provide free onsite child care for the children of the teen parents we serve, creating a nurturing environment for the kiddos while their parents learn valuable life skills and build community.
If you enjoy working with children and are looking to make an immediate impact in your community, please visit https://www.generationhope.org/volunteer to learn more.
Join us for Arlington’s biggest civil rights & social justice event of the year. The banquet is back in person at the Arlington Campus of George Mason University.
Our keynote speaker this year is Symone Sanders from MSNBC and former Chief of Staff for Vice-President Kamala Harris.
The Master of Ceremonies is Joshua Cole, former state delegate, NAACP President, and local pastor.
Tickets/seating are limited. Purchase your ticket today! Sponsorship opportunities available.
Live standup comedy starring John F. O’Donnell (Comedy Central)
Friday, October 20
Headliner: John F. O’Donnell
John was a correspondent on the radical comedy news TV show, “Redacted Tonight,” for 5 years. Recently, he released his debut one-hour standup special,