The Time to Do a VA Assumption is Quickly Passing

[Sean Hudgins]

I know this topic has been significant in this forum, But I want to cover something that many people are not discussing—the opportunity cost of not doing one of these deals now. 

The reality is that the rates everyone wished for were mostly available between 2020 and 2022, which was also the time that saw the most significant appreciation in home values. This only increased the loan amount gap and current market value. I know that most people out shopping these kinds of deals are already looking at the gap as the biggest barrier to entry into an assumption. The second largest objection I get when discussing VA Assumptions is the time frame and hassle you have to go through as the buyer and seller. But as things have slowed due to the affordability and seasonality of the market, sellers are now looking at this as a more viable option than ever to get top dollar for their home. This gap will only increase as time goes by, and we all can likely agree that the rates will not be heading down below 5% any time soon, and if they do, we will have more significant issues.

I believe that with the current state of the market and mortgage rates coming down slightly (we will see if that is here to stay) over the past couple of weeks, the timeframe for even the best financially poised buyers to make these assumption deals happen is only going to last maybe 12-24 months. In my market, the average gap I have seen in the past six months has been between 70k and 150k; if the market continues to appreciate slowly or even remains flat, that gap will continue to spread as mortgages are paid down. That's not even considering the possibility of another round of buying frenzy if rates drop into the 5s again. In 24 months, there will likely be only a few properties that can be had without bringing at least 100k to the table to cover the gap, and much past that, no one will even be talking about VA assumptions anymore.

I would suggest that if you have some excess cash available or have found a lender willing to go into a second position, NOW is the time to grab these deals. I mean NOW because once the summer selling season is upon us again, I'm afraid even fewer sellers will be willing to participate in the assumption process. If I were even remotely considering a new primary residence purchase or had the opportunity, I would be shopping for a new home ASAP because this opportunity to get an assumption with rates in the 2s and 3s is quickly going to become a thing of the past. We would all love to have more properties at those low rates!

Do you agree that this is a quickly passing window, or do you see the opportunity staying around longer?