VA loans made after March 1, 1988 require the buyer assuming the loan to qualify. Owner-occupants or owner-investors can assume these loans, if qualified. They need not occupy or be veterans. The veteran is then no longer responsible.
These loans can also be sold without loan qualification on installment sales such as lease purchases, contract for deed or land contracts, as long as the original veteran remains the owner of record and is willing to remain liable for repayment of the loan. There are some additional things the veteran could do to protect himself.
If a veteran assumes another VA loan, he can apply for an interest rate reduction, the appraisal fee is waived and it could be less expensive than obtaining a new loan.
In situations where the veteran is unable to continue making mortgage payments, the VA, at its discretion, may waive loan qualifications to a willing buyer on the assumption. VA referes to this as "Special Apporval", which really means no approval is required to qualify to assume some VA loans made after March 1, 1988. This is done to avoid foreclosures. Two requirements must be met for waiver of the assumption approval: (A) The veteran must be unable to continue making payments and (B) reasonable effort has to have been made to find a credit-worthy buyer for the property. The veteran would also remain liable. The veteran seller and a prospective buyer should make an appointment with a VA loan guarantee officer to discuss waiving the requirement to qualify to assume. If Va agrees to waive the requirement to assume, they may influence the lender to do likewise. The prospective buyer does not have to be a veteran. NOTE: It would be wise to have a buyer on contract willing to make up any back payments, subject to no qualifications, when the VA seller discusses the approval waiver with VA and/or the lender. They are more likely to waive the approval on assumption with a bona fide buyer on contract.
If you are thinking of purchasing a home or selling your home in the Northern Nevada area, please call Sandra at (775) 287-8222.
Please consult a professional lender that does VA financing. Every attempt has been made to be accurate.
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