How Long Does It Take to Assume a VA Loan?

A VA loan assumption allows a homebuyer to take over an existing VA loan. This option can be particularly valuable in periods of rising interest rates, offering a lower mortgage payment than a new loan. For homeowners with a VA loan, offering an assumable loan can be a strong selling point for their property. While assumptions typically involve lower fees and fewer closing costs than a traditional home purchase, they are not automatic and require approval from both the lender and the Department of Veterans Affairs (VA).

Eligibility and Initial Requirements for Assumption

Before applying for a VA loan assumption, prospective assumers must meet eligibility criteria and gather documentation. The assuming party, who does not need to be a veteran, must demonstrate creditworthiness and income stability to the lender. Lenders typically look for a minimum credit score, often around 620, although some may accept scores as low as 580.

A financial assessment involves the debt-to-income (DTI) ratio, which compares monthly debt obligations to gross monthly income. While the VA does not set a strict maximum DTI, lenders often prefer a ratio of 41% or lower, and may scrutinize applications with higher ratios more closely. Additionally, the assuming party must meet the VA’s occupancy requirement, intending to occupy the property as their primary residence within a reasonable timeframe, typically 60 days of closing.

To support their application, individuals will need to provide financial documents. These commonly include recent pay stubs, bank statements, and tax returns to verify income and assets. A credit report authorization is also required to allow the lender to assess credit history and financial responsibility. These documents help the lender determine the applicant’s financial capacity and ensure compliance with guidelines.

The VA Loan Assumption Application and Approval Process

Once initial requirements are met and documents are prepared, the application for a VA loan assumption begins with the loan servicer. The assuming party submits an application package to the current lender, who processes the assumption. This package includes financial documentation such as income verification, credit reports, and employment history.

The lender then undertakes a review process, similar to underwriting a new loan. This involves verifying the applicant’s eligibility, assessing their creditworthiness, and ensuring they meet the lender’s financial standards. The lender may order an appraisal of the property, though this is not always required for assumptions. If the original loan was made with a partial release of liability for the seller, the lender will also coordinate with the VA for its approval.

For loans originated after March 1, 1988, VA approval is required to ensure the assumption meets VA guidelines. The VA reviews the application and, if approved, authorizes the transfer of the loan. This review process by both the lender and the VA is designed to ensure the financial stability of the new borrower and the continued integrity of the loan.

Factors Affecting the Assumption Timeline

The duration of a VA loan assumption can vary, though recent changes aim to streamline the process. Historically, the approval timeline averaged between 90 and 120 days. However, VA Circular 26-23-27 has mandated that lenders and servicers process and decide on assumption applications within 45 calendar days. This directive aims to hold servicers accountable and reduce previous delays.

Several factors can influence whether an assumption adheres to or deviates from this 45-day guideline. The responsiveness of the assuming party in providing requested documentation promptly is key. Delays in submitting accurate paperwork can significantly prolong the process. The efficiency and current workload of the lender’s assumption department also play a role, as some lenders may have more streamlined processes or heavier backlogs than others.

The complexity of the loan or property can also affect the timeline. For instance, if an appraisal is required, coordinating this step can add time. The need for any VA review or approval steps, particularly if a substitution of entitlement is involved for the seller, can introduce additional processing time within the VA’s own review periods. While the 45-day mandate provides a target, the actual time to close can still range from 30 to 90 days or sometimes longer, depending on how smoothly these elements proceed.

Post-Approval and Closing

Once the VA loan assumption receives approval from the lender and the VA, the process moves towards finalization and loan transfer. The next step involves completing the assumption agreement, a legal document that outlines the terms of the loan transfer and assigns mortgage responsibility to the new borrower. This agreement specifies the interest rate, remaining balance, and monthly payment that the assuming party will take over.

Scheduling the closing is then arranged, involving parties such as the title company, real estate agents, and the lender. At closing, the new borrower will typically pay a VA funding fee, which is 0.5% of the loan balance. This fee supports the VA loan program for future generations of military homebuyers.

For the original homeowner, obtaining a release of liability absolves them from financial responsibility for the assumed loan. While not automatic, this release ensures the seller is not held accountable for future payments or potential defaults by the new borrower. Upon completion of these steps, the loan is officially transferred, and the new borrower begins making payments.