I'm seeing a real opportunity for VA buyers in my market that I wanted to share with you all. Over the last few months I've noticed more and more assumable loans pop up, mainly VA and a couple FHA.

In my opinion, VA buyers have a huge advantage right now. While technically.. non-VA buyers can jump in on these, it's usually a bit tricky because the seller needs another VA buyer to effectively transfer the VA loan off their record - you can only have one VA loan at a time. FHA assumables are picked up way quicker than VA because there are way more people who are fit to assume them.

I'm seeing homes and townhomes with assumable VA loans boasting interest rates as low as 2.25%, going up to 4.9%. Beautiful. Now, if you don't have a great understanding of how loan assumption works, here's the breakdown. The lender agrees to allow a new buyer to assume the terms of the seller's current loan. This new buyer pays a small fee of 0.5% of the purchase price, which translates to around $2,000 on an average $400,000 home. It's VA, so you can do 0% down, leaving you with just the closing costs (roughly 2% of the purchase price, or $8,000) and any due diligence/earnest money you put in your offer.

The catch here is as the buyer you MUST pay the difference between the price you offer and the balance on the seller's loan. SO... this only works with a decent amount of cash OR.... Since it's a VA loan, and assuming the seller hasn't owned it for too long, that difference isn't astronomical.

Let's do some math: if they bought the property a year or two ago, likely with 0% down, they probably only paid off $6-12k of equity.

Now let's say they're asking for $10k more than what they bought it for a year ago. You'd only need to come up with around $16-22k. So, your total out-of-pocket cost would be approximately $30k including everything. And now you have a super low-interest rate that others can only dream of.

This is a fantastic option for VA buyers in today's market. If you're actively searching, make sure your realtor is well-versed in finding assumable deals and can guide you seamlessly to the closing table. It's usually a straightforward process, provided the lender has already approved the assumption – something a listing agent hopefully would get before mentioning it in a listing.

If you're serious about finding great deals, you do have to get a little creative. A good buyer agent and/or investor will go beyond simply searching for assumable loan listings with keywords on Zillow and start asking other listing agents if their sellers would consider it in exchange for price flexibility or other terms.

Best of luck out there, and I genuinely hope this insight helps you snag a fantastic deal!

Raleigh, North Carolina

7 Votes