Is this true regarding VA assumable loans? - Posted by Nicole

Real Estate Investing Real Estate Financing
#1

Posted by JPiper on May 09, 2000 at 10:10:53:

If memory serves, FHA loans may be assumed by an investor…but the loan cannot exceed 75% of market value as established by an appraisal. This should be verified as well. Can’t tell you what the rule is on VA.

I’d be cautious with information you receive from loan officers handling these loans…they may not be familiar with the guidelines.

There are some guidebooks on underwriting criteria available on the internet…don’t have a web address, but a good starting point is the HUD site.

JPiper

#2

Is this true regarding VA assumable loans? - Posted by Nicole

Posted by Nicole on May 09, 2000 at 07:36:24:

Hi!

I talked with a seller last night with a VA assumable loan. This couple is in the military and must relocate to another base in a month. They are motivated, however, they indicated that the loan is NOT assumable if I am not in the military. I did not know that there was that type of stipulation for VA loans. Is that true?

#3

Re: Is this true regarding VA assumable loans? - Posted by Soraya

Posted by Soraya on May 09, 2000 at 12:25:38:

Don’t assume the loan. Take title to the property Subject to the existing loan. Don’t involve the VA with the transaction. Buyer just makes payments to VA. It is not against the law to do a Subject to transaction, the lender can’t put you in jail. They do have the right to call the loan immediately due and payable. However, they very rarely call the loan as long as the payments are being made on time.
Soraya

#4

Do they require owner occupancy? - Posted by drew

Posted by drew on May 09, 2000 at 09:43:40:

JPiper,

I’ve been told by two lenders that VA and FHA loans, when orignated or assumed, require owner occupancy. Therefore, as an investor not willing to make a knowingly false statement to the lender, I figured assuming these loans was not an option. Do you know if this is the case?

Thanks,

Drew

#5

Re: Is this true regarding VA assumable loans? - Posted by JPiper

Posted by JPiper on May 09, 2000 at 08:53:34:

All VA loans are assumable by anyone, including by those that are non-Veterans.

An open question though is regarding the seller’s VA eligibility. You should check this out with several lenders, or check out at the VA website. Worst case scenario is that the Veteran is eligible for in excess of $200K provided they income qualify…meaning they can still get a new VA loan if non-Veteran assumes. This was true even with the old “non-qualifying” type of assumable VA loan. But a formal assumption should release the Veteran’s liability…so best case is that this is totally false.

Check it out in any case. Regardless, all VA loans are assumable.

JPiper

#6

Yes and no - Posted by David

Posted by David on May 09, 2000 at 07:59:13:

many military like to get another military to assume their mortgage, because it reinstates their eligibility to get ANOTHER Va loan. If assumed by someone without VA eligibility, either active military or veteran, then the seller will lose at least some of their eligibilty for a new VA loan or may lose their entire eligibilty.

#7

Re: Is this true regarding VA assumable loans? - Posted by JPiper

Posted by JPiper on May 09, 2000 at 12:40:13:

There’s no particular need to do a subject to transaction on a VA loan if the due on sale clause is a concern. VA loans permit a contract for deed without triggering the DOS. Naturally if you were to buy with a contract for deed you would want to implement some safety precautions.

Perhaps a small point…the VA only guarantees the loan. A borrower does not make payments to them, they are not the lender.

JPiper

#8

Owner occupancy required to assume VA & FHA loans??? - Posted by drew

Posted by drew on May 09, 2000 at 09:45:58:

JPiper,

I’ve been told by two lenders that VA and FHA loans, when orignated or assumed, require owner occupancy. Therefore, as an investor not willing to make a knowingly false statement to the lender, I figured assuming these loans was not an option.

Do you know if this is the case?

Thanks,

Drew