Looking for Advice on Structuring a Deal – Need Guidance - Va Loan Assumption

[Dani Beit-Or]

I’m looking for insights on how to put together a deal with the following details:

• Asking Price: $260K
• Market Value: ~ $265K
• Property Details: 3 bed / 2 bath / 1,400 sq. ft.
• Days on Market: ~100
• Loan Type: VA Loan (Attempting a VA Loan Assumption)
• Mortgage Balance: $200K

The Challenge

The seller is behind on mortgage payments, and while I don’t have an exact amount, the agent mentioned it’s over $20K. The agent also stated that because the seller is behind, the loan cannot be assumed.

Questions for the Group:

1. Is it true that a VA loan cannot be assumed if the seller is behind on payments?
2. How can I structure this deal to protect my interests? I’m open to paying the $20K to bring the mortgage current, but I want to ensure my position is protected. If the deal falls through, how can I secure my $20K so I’m not left out of pocket?

[Andrew Kubik]

How to Structure a Deal with a VA Loan Assumption & Mortgage Arrears

Hi Dani,

This is an interesting deal, and you’re right to be cautious. Here’s how you can navigate it:

1. Can a VA Loan Be Assumed If the Seller is Behind on Payments?

Yes, but only after the loan is brought current. Most lenders require the delinquent balance to be paid before approving a VA loan assumption. Since the seller is behind $20K+, you’d need to clear that debt first before proceeding with the assumption.

2. How to Structure the Deal to Protect Your $20K

If you’re willing to cover the $20K arrears, here’s how to protect yourself:

Option 1: Secure Your Funds with a Lien or Escrow Agreement

• Use an escrow account: Deposit the $20K into escrow with clear terms—if the assumption is denied, the funds return to you.
• Record a promissory note & lien: If the deal falls through, this would give you a legal claim against the property to recover your funds.

Option 2: Sub-To + Wrap While You Assume

• Subject-to deal: Take over the existing loan payments before assumption approval, securing control.
• Escrowed deed transfer: The seller signs the deed into escrow only to be recorded after assumption approval, ensuring they can’t back out.
• Lease option fallback: If the assumption is denied, consider a lease option agreement until another solution is found.

Option 3: Negotiate a Seller Financing Hybrid

• Ask the seller to carry a small second note for the $60K equity gap at favorable terms.
• Use your $20K as a down payment, structured as a secured loan against the property.

3. Additional Considerations

✅ Confirm assumption eligibility – Contact the lender directly before paying the arrears.
✅ Get everything in writing – Work with a real estate attorney to draft a contract protecting your funds.
✅ VA entitlement impact – If you assume the loan, check whether the seller's VA entitlement is released.

Final Thoughts

This deal has potential, but structuring it correctly is key. Ensure lender approval before bringing the mortgage current, and use escrow or a lien to protect your money. If assumption doesn’t work, consider a subject-to or seller-financed hybrid deal.

Would love to hear more details once you clarify the lender’s stance—keep us posted!