Reaching a point in life when you can buy a home is hard work. And if you are a veteran or you serve in the army, it can be a greater challenge compared to people who are not. What options do you have if you are a veteran and want to buy a house? Well, there’s one mortgage option specifically for veterans: a VA loan. Can a VA home loan be transferred to another person?
What is a VA loan?
The VA loan is a mortgage that is provided by private lenders and supported by the US Department of Veterans Affairs. He helps US veterans, active servants, and widowed military spouses to buy a home.
VA loans were introduced under the GI Bill in 1944, but they have become increasingly popular in recent years. In the first quarter of 2019, 8% of home purchases were made with a VA loan. This type of loan is an attractive option because it is easy to qualify and requires no down payment.
VA home loan assumptions: Lender participation required
Most today’s VA loan assumptions require lender participation and approval. For loans that were closed before March 1, 1988, the consent of the lender is not required because these VA loans were created in accordance with the guidelines that made them “freely predictable”.
If your VA home loan has a case number issued (or other commitments made) after March 1, 1988, you will need to work with the lender to complete your VA loan.
Where to find
Unfortunately, possible mortgages are not widely available. The best solution may be to have an FHA or VA loan. Other conventional mortgages can rarely be established. Instead, lenders use the sale clause, which means that the loan must be repaid when the home is transferred.
Lenders usually do not use the mortgage transfer option, so they are not willing to approve the transfer. Buyers would go ahead with a more “mature” loan, without having to pay interest earlier (and could get a lower interest rate). Sellers could sell their home more easily – perhaps at a higher price – with the same benefits.
Exceptions to the rule
In some cases, you can still transfer the loan – even with a sales clause. Transfers between family members are often allowed, and the lender can always be more generous than what the loan agreement says. The only way to be sure is to ask the lender and check with your local lawyer.
Even if lenders claim this is not possible, a lawyer can help determine if your bank is providing accurate information.
Remember that changing the name of the loan only affects the loan. You may still need to change who owns the property by transferring ownership, using a resignation act, or taking any other steps required in your situation.
Federal Deposit Insurance Corporation (FDIC) regulations prevent lenders from using the option to accelerate payments under certain circumstances. Check with your lawyer if you qualify. Some of the most common situations include moving:
- To a living common tenant when the other dies
- To a relative after the borrower’s death
- To the borrower’s spouse or children
- As a result of divorce and separation agreements
- In vivos trust (living trust) in which the borrower is the beneficiary