3 VA loan assumption myths that are costing your clients money

The number of VA loan assumptions jumped from 308 in 2022 to 2,244 in 2023, a spike of more than 600 percent, according to VA testimony to Congress reported by Inside Mortgage Finance. That number keeps climbing as rates stay high and sellers realize what they’re sitting on.

A VA loan assumption lets a qualified buyer take over the seller’s existing VA loan, at the seller’s original rate and remaining balance, instead of getting a new mortgage at today’s rate. That’s a strong selling point when older loans carry rates well below today’s market, and it’s also where the confusion starts. Three misunderstandings show up over and over, and each one can cost your client money or leave them exposed.

3 VA loan assumption myths

Myth No. 1: Only a veteran can assume a VA loan

Not true. Any creditworthy buyer can assume one, veteran or not. But that is exactly where the real risk hides. If the buyer is not a veteran substituting their own entitlement, the seller’s entitlement stays tied to that loan until it is paid off or refinanced, not released the way it would be in a normal sale. A veteran seller needs to hear that before accepting the offer, not after.

Myth No. 2: The buyer only needs to cover closing costs

Assuming the loan means taking over the seller’s rate and remaining balance, not the sale price. If a home sells for $1 million and the seller owes $500,000, the buyer assumes that $500,000 at the seller’s rate, but still owes the other $500,000, plus closing costs, in cash or a second loan, at closing. In the deals my real estate team has been a part of, that gap is the single biggest reason buyers walk before closing.

Myth No. 3: The VA’s 45-day rule means 45 days

VA Circular 26-23-27 mandates that servicers process an assumption request within 45 calendar days. That is the rule on paper. If you’ve spent any time around the military, you know the saying: Hurry up and wait. This is that, with a mortgage attached.

Sebastian Winfield, my son and business partner, has now completed four VA loan assumptions as a listing agent. None of them closed anywhere close to 45 days. His most recent took nine months. His first took 14. The holdup is rarely the buyer; it’s thin servicer staffing and no single point of contact until underwriting picks up the file.

There is a remedy, too. If a servicer misses the deadline, VA can flag the file, refuse to honor its guaranty and bar repeat offenders from handling VA loans, naming them publicly. Few agents or sellers know that option exists.

Why sellers take the VA loan assumption deal anyway

Sebastian’s most recent assumption involved active-duty sellers who needed to move out of state on a timeline. Because assumptions don’t require a new appraisal, the buyer and seller agreed on a price roughly $30,000 over fair market value — cash the seller wouldn’t have gotten from a traditional buyer working off an appraised number.

That premium is real, and it’s why interest in assumptions keeps growing. But it comes with costs most agents don’t price in: The equity gap, the entitlement exposure, and the timeline. Timeline is where these deals go wrong.

Where the 9 months went in a VA loan assumption

On our last transaction, Sebastian used a third-party assumption company similar to a short-sale negotiator. For the first month, things moved. Then communication with the servicer broke down.

Banks don’t keep good internal notes, and callers rarely reach the same rep twice. Underwriting happens in a communication vacuum until one loan officer picks up the file, then the deal moves fast. Sebastian’s nine-month file closed in about 30 days once that happened.

The reason is structural. Banks make money originating and refinancing loans, not processing assumptions, so assumption departments stay thin, sometimes one or two people covering every file the company has. There’s no financial incentive to build out the team.

The mistake that cost 4 extra months

His first assumption taught a separate but critical lesson. The opening application packet has to be printed, signed by both buyer and seller, and submitted complete. Every servicer he’s worked with requires this. One piece of missing information doesn’t trigger a request for the missing piece; it triggers a decline, and the file goes to the back of the line.

On that deal, the packet was declined without notice. Sebastian kept calling for weeks, was told the file was “still in review,” and only later learned it had already been rejected. That deal took 14 months to close.

What this means for agents handling a VA loan assumption

If you’re advising a client into a loan assumption, on either side, do five things differently than a standard transaction:

1. Confirm the buyer can cover the equity gap, cash or a second loan, before anyone gets attached to the rate. Better it kills the deal in Week 1 than Month 9.
2. If your seller is a veteran and the buyer isn’t, walk them through the entitlement consequence before they accept. Entitlement stays tied to the property until the loan is paid off or refinanced.
3. Set the timeline expectation at nine to 12 months, not 45 days. Both sides need to hear this before they sign.
4. Treat the opening packet like it only gets one shot. Confirm every signature and field before it goes to the servicer. A declined packet gets restarted, not flagged.
5. Log every call: date, name (if you get one), what was said. The servicer isn’t keeping a reliable record, so you have to.

The premium buyers pay for an assumed VA loan is real money for a seller. But agents who sell that premium without pricing in the gap, the entitlement, and the timeline are setting their clients up for a frustrating nine months, or worse. The deal can still be worth it. It’s just rarely the deal the regulation describes.