Subject To -- VA Loan Question

[Hans Baum]

I'm in the process of purchasing a home for personal use and have come across a dream house. The home is priced at $430,000, with an existing mortgage of $350,000 at a 3% interest rate. I'm considering assuming this mortgage, either "subject to" or by transferring the property into a trust, where I would then buy a majority share and cover the remaining balance in cash.

The complication arises from the fact that this existing mortgage is a VA loan. I understand that VA loans are assumable, but I'm unsure how this affects the original borrower's ability to use their VA loan benefits in the future. Specifically, if the original loan recipient has a total VA loan entitlement of $750,000, does my assuming their $370,000 mortgage reduce their available entitlement to only $380,000 for future use? So does that mean they can only buy $380,000 of house?

I would greatly appreciate insights into how this scenario impacts the original borrower's VA loan entitlement and any potential solutions or considerations I should be aware of in proceeding with this transaction. I would prefer to place the title in a trust and purchase a majority share in the trust, as I have heard people are doing (clears the mortgage from the seller's DTI), but I would really appreciate hearing what you have to say. This is my first home purchase.

[Marc Winter]

"I would prefer to place the title in a trust and purchase a majority share in the trust, as I have heard people are doing (clears the mortgage from the seller's DTI), but I would really appreciate hearing what you have to say."

@Lynn McGeein gives good advice.  I'd like to add this:

Placing the title into an inter vivos revocable trust will NOT affect the mortgage.  That means the person/entity who signed the mortgage/note will still be 'on the hook' for the loan.  

Remember, the title is placed into a trust, and administered by the trustee at the direction from and for the benefit of the beneficiaries.  That has nothing to do with any liens or loans attached to the property--they still stick to that property.

To learn more, speak directly to a VA mortgagee/lender or mortgage broker about how to assume the loan and how/if you can absolve the current borrower from any liability.

Keep investing and moving forward!