Loan Assumption - Do I have to occupy it?

Question

Ok, so I've searched and come up dry on an answer. I am looking at assuming a VA loan from the seller and wondering if this means I still fall under the rule of having to live in it as my primary residence?

Kevin Hunter · Answer

@Dominic Franco, great question and one that is really hard to find an answer to.  I will preface my post with a comment.  Be careful with the responses you receive here.  Often, although well intentioned, people provide incorrect answers to questions so make sure to execute due diligence in researching as well.  For example, @Andrew Postell is incorrect in his post above.  You DO NOT have to be a veteran of the U.S. military to assume a VA loan.  That is not one of the requirements of VA home loan assumption.  From va.gov:

"Pending lender approval, and if a buyer qualifies for the payment amount, anyone can assume the mortgage, civilian or military. The individual assuming the loan does not have to be a veteran. However, if the loan assumer is not a veteran, then the seller will lose his VA loan benefit because the benefit stays with the property and mortgage until it is paid off."

But again, this was not your question.  Your question was specifically regarding the residency requirement of a VA home loan assumption.  I have asked this question to several credible lenders over the years and they all told me the same.  Although the home residency requirement is not specified on a VA home loan assumption, it will be treated the same as a traditional VA home loan purchase meaning the home needs to be occupied by the borrower within a reasonable amount of time, typically sixty days, and needs to be occupied permanently for a time typically one year or more.  Again though, don't take my word for it, or any one else's for that matter. Reach out to ten or fifteen lenders and ask them the same question.

Mike Johns · Answer

If the entitlement stays in their name then you do not have to live in it. It also depends on the mortgage company though. I’ve done 3 VA loan assumptions 1 with US Bank and 2 with Wells Fargo and had no issues. However, I tried to do one that was with Penny Mac and they wouldn’t do it unless it was owner occupied.

Dominic Franco · Answer

Sorry for the late reply guys, the deal didn't go through (mostly because Penny Mac's lack of communication and sense of urgency) but I appreciate all the answers.

@Andrew Postell Kevin is correct, you do not have to be a veteran, however, if you are not, then the VA benefit would be tied up in that property so it is unlikely that the veteran would want to do that. In this case, I am a veteran so the seller was ok with it because I would be able essentially assume his VA benefits and transfer mine to him.

@Kevin Hunter thank you for the information, always trust but verify right? As far as VA occupancy goes, I have been told you must intend to occupy the residence within 60 days of closing and reside for a year, life-changing circumstances notwithstanding. Essentially, if you buy the property with intentions of occupying it but life changes (PCS orders, new job, baby on the way) then you are able to vacate the property and put a renter in.

@Mike Johns  Wow, 3 VA loan assumptions? That is impressive. It was very enticing because of the low-interest-rate I'd assume along with being further into the amortization schedule (less interest more principal). For your loan assumption did the veteran leave their VA benefits with the property or did you transfer your VA benefits to the seller? I figured most veterans wouldn't want to leave that tied up into the property. I know I wouldn't.

Andrew Postell · Answer

@Dominic Franco to assume the loan you will have to qualify for the loan in all aspects.  Not only will you have to occupy it but you will also have to have income, credit, and most importantly....be a veteran of the US military to assume a VA loan.  Hope this helps but feel free to tag me with any other questions about it.  Thanks!

Andrew Postell · Answer

@Dominic Franco thanks for the feedback here.  Good to know about the VA benefit item.  I have also called several other friends in the industry researching this since last time and all of them stated that you don't have to be a veteran...however, some did say they would require you to live in the property...but most did not have that requirement.  I would certainly recommend for anyone researching this subject to call and ask one person....then call back to get another person....just to confirm these sorts of things with the lender you are trying to assume from.  Great post. Always good to learn the right info.  Thanks!

Dominic Franco · Answer

@Mike Johns interesting. You'd think they wouldn't want to leave that much of their benefits tied up into a property they no longer own. I know the VA loan limit is $484,350 so to my understanding if the veterans loan that you assumed was in the original amount of $100,000 then that veteran would have $384,350 left of benefits to fund another VA home loan.

Mike Johns · Answer

Yes they all kept their VA entitlement in their name for the three loan assumptions I’ve done, so I didn’t have to move into them and could rent them out.

Andrew Postell · Answer

@Mike Johns ok, thank you for the feedback.

Mike Johns · Answer

I’ve only done 3 VA loan assumptions. I’m a 100% positive they were loan assumptions.

Andrew Postell · Answer

@Mike Johns you are saying you assumed 5 VA loans?  You aren't talking about "Subject To" transactions?  I certainly am not above admitting if I'm wrong.  It has certainly happened before and I'm sure it will happen again.  I am a former Marine so I've spoken with the VA about this before....but maybe I didn't word it correctly or something.  I'll do some more research on this right now.  Certainly willing to listen to other people's experiences here.

Loan Assumption - Do I have to occupy it?

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