What Is a VA Assumable Loan? A Colorado Springs Homebuyer’s Guide

If you’re house hunting in Colorado Springs, you may have seen listings advertising a “2.75% assumable VA loan” or heard someone mention taking over a seller’s mortgage.

With today’s interest rates, that can get your attention pretty quickly.

But what does assuming a VA loan actually mean?

What is a VA loan assumption?

A VA loan assumption allows a qualified buyer to take over an existing VA mortgage instead of obtaining an entirely new mortgage.

That means the buyer may be able to take over the seller’s existing:

• Interest rate
• Remaining loan balance
• Remaining loan term
• Principal and interest payment

If the seller purchased or refinanced when interest rates were significantly lower, the financing attached to the home can be extremely valuable.

For example, instead of financing the entire purchase price at current rates, a buyer may be able to assume a VA mortgage with a rate in the 2%–3% range.

Do you have to be a veteran to assume a VA loan?

No — and this is one of the biggest misconceptions I hear about VA assumptions.

A VA loan can potentially be assumed by a qualified buyer who is not a veteran.

However, the buyer’s veteran status matters when it comes to the seller’s VA entitlement.

A qualified veteran buyer may be able to substitute their VA entitlement for the seller’s entitlement. If there is no substitution of entitlement, some or all of the seller’s entitlement can remain tied to that loan until it is paid off.

That is something both buyers and sellers need to understand before moving forward.

What is the “gap” on an assumable loan?

The buyer isn’t simply taking over the loan and walking into the house with no additional money needed.

There is usually a difference between the home’s purchase price and the remaining balance of the seller’s mortgage.

That’s what you’ll often hear me call the assumption gap.

For example:

Home purchase price: $450,000
Remaining assumable loan: $400,000
Approximate gap: $50,000

The buyer needs a strategy for covering that difference, whether through cash or another financing option that is permitted for the transaction.

This is why knowing that a house has a 2.75% loan isn’t enough. We need to know the remaining balance, payment, rate, gap and assumption requirements to determine whether it actually makes sense for you.

How long does a VA assumption take?

This is another important difference between an assumption and a traditional home purchase.

VA assumptions can take longer.

The existing loan servicer generally handles the approval process, and timelines can vary significantly from one servicer to another.

Setting realistic expectations from the beginning is incredibly important.

Why are VA assumptions such a big deal in Colorado Springs?

Colorado Springs has a huge military and veteran population. Many homeowners in our area purchased or refinanced using VA loans when mortgage rates were historically low.

That means we have something pretty unique in our housing market:

Homes with existing VA financing that may carry interest rates dramatically lower than what’s otherwise available to buyers today.

Not every assumable home is automatically a great deal. The purchase price, loan balance, gap, payment, entitlement situation and buyer’s individual finances all matter.

But they’re absolutely worth knowing about.

Want to see assumable homes in Colorado Springs?

I specialize in helping buyers and sellers navigate VA loan assumptions and spend a lot of time tracking assumable opportunities throughout the Colorado Springs area.

If you’re curious whether an assumable loan could work for you, reach out. We can look at the actual numbers and determine whether it makes sense for your situation.

This information is for educational purposes and is not lending, legal or financial advice. Assumption eligibility and requirements are determined by the loan servicer and applicable VA guidelines.