Which loans are assumable?
| Loan type | Assumable? | Key condition |
|---|---|---|
| VA | Yes | Anyone can assume if they qualify; the lender reviews credit and income |
| FHA | Yes | For loans closed since December 15, 1989, the buyer must pass a creditworthiness review |
| Conventional fixed rate | Usually no | Due-on-sale clauses generally make the loan payable on transfer |
| Conventional ARM | Sometimes | Fannie Mae allows transfer of many ARMs if the buyer qualifies |
FHA's rules also bar private investors from assuming loans covered by the 1989 law. We couldn't verify USDA's current assumption rules on an official source, so ask a USDA lender directly.
Can a non-veteran assume a VA loan?
Yes. The VA Buyer's Guide says anyone can assume a VA home loan if they qualify. The catch is the seller's entitlement: the VA benefit that guarantees part of the loan. Under federal law (38 U.S.C. 3702), a seller's entitlement can be restored when a veteran buyer assumes the loan and agrees to substitute their own entitlement. If a non-veteran assumes it, the seller's entitlement generally stays tied to that loan until it's paid off, which can limit the seller's ability to use a VA loan again.
Release of liability
When a qualified buyer assumes, the seller needs a formal release so they're no longer responsible if the buyer stops paying. For FHA loans, only the lender can execute the release; for loans under the 1989 rules, the lender prepares it when a creditworthy buyer assumes. Don't hand over a loan without one.
VA assumption fee
VA charges a funding fee of 0.5% for a loan assumption, unless the buyer is exempt. On a $280,000 balance that's $280,000 × 0.005 = $1,400. The lender may also charge processing fees.
The down payment gap
You take over the balance, not the price. The difference between the price and the balance has to be paid in cash or with a second loan.
Example: a $400,000 home with a $280,000 VA balance at 3% and 25 years left.
| Assume the loan | New loan for the same $280,000 | |
|---|---|---|
| Rate | 3% (existing) | 6.5% (example) |
| Term | 25 years left | 30 years |
| Principal and interest | $1,327.79 | $1,769.79 |
| Cash needed beyond the loan | $120,000 gap + $1,400 funding fee | $120,000 down payment + closing costs |
The assumed loan saves about $442 a month here, but you need the $120,000 gap. If you borrow the gap with a second loan, add that payment before comparing. Model it with the mortgage calculator, the VA loan calculator and the home equity loan calculator.
Steps to assume a loan
- Confirm the loan type and that the servicer allows assumption.
- Apply with the servicer; expect a credit and income review.
- Arrange money for the gap and closing costs.
- For VA loans, decide whether a veteran buyer will substitute entitlement.
- Close, and make sure the seller receives a release of liability.
Sources: VA Home Loan Buyer's Guide; VA: purchase loans; 38 U.S.C. 3702; HUD Handbook 4155.1, Chapter 7 (assumptions); Fannie Mae Servicing Guide D1-4.2-02.
Every worked example on this page was checked with Calcist's own engine and an independent reference.