Selling the VA-Financed Home
When you purchased your home with a VA-backed loan you used what is undeniably one of the best loan products on the market. With no money down and a government guarantee, few loans can match it.
Another benefit of the VA loan is that it’s assumable, an attractive feature if you are trying to sell your home in a buyer’s market.
The Assumable Mortgage
Assumable mortgage loans allow the buyer to take over the loan at the same rate and same term of the existing mortgage. The benefit of assuming a VA mortgage for the buyer is apparent if interest rates have risen since you took out the loan and the loan’s terms may be more attractive than terms the buyer would be offered if he applied for a new loan.
The drawback to this situation occurs if the buyer isn’t a veteran, or otherwise isn’t eligible for a VA loan. In these cases, your entitlement remains attached to the loan so you won’t be able to obtain another VA-backed mortgage.
Advantages of the Assumable Mortgage
An assumption sale has benefits for both the VA seller and the buyer. These include:
- Closing costs are lower than those in a conventional sale
- No appraisal
- The process is quicker
- The VA has no requirements for repairs
Disadvantages of the Assumption Sale
We touched on the biggest disadvantage of this type of sale earlier and that is what happens with your VA entitlement. It is attached to the home until the buyer pays off the loan. Now, there is an exception to this. If your buyer is a veteran and meets VA loan requirements, you may be able to retain your entitlement and be able to get a new VA loan. The buyer must be willing to substitute her eligibility to free up yours.
Although only a slight disadvantage, it bears mentioning that if you find a buyer that wants to assume your loan his or her qualifications will have to be reviewed by either the VA or the lender.
TIP: Once the loan is successfully assumed, you’ll need to call the VA and ask for a release of liability. Otherwise, you risk being on the hook for the loan if your buyer defaults.
The whole issue of your VA entitlement can be confusing, so speak with a VA loan specialist or visit the U.S. Department of Veterans Affairs website.
3 Things that can Negatively Impact your Home
3 Tips for Selling your home in a Down Market
3 Tips to Combat a Low Appraisal
3 Unique Aspects of the Luxury Home Sale
3 Ways to Keep a Low Appraisal from Derailing the Deal
4 Characteristics of a Seller
4 DIY Home Staging Tips
4 Steps to Pricing your Home
4 Important Forms in the Home Sale Process
5 Must Do Repairs
6 Tips for Selling your Home in Winter
Buy First or Sell First? 3 Things to Consider
Downsizing: It is not just for Retirees
Energy Efficient Windows can Help you Sell your Home
Getting the House Ready for the Market (Part 1)
Getting the House Ready for the Market (Part 2)
Getting the House Ready for the Market (Part 3)
Getting the House Ready for the Market (Part 4)
How to Attract an Affluent Buyer
How to Hire a Listing Agent
How to Sell and Buy a House at the Same Time
How to Treat the Lowball Offer
Inexpensive DIY Staging Tips
Protecting Your Privacy
Click here to see ALL articles.