FHA Loan Articles
News, updates, and explanations to keep you informed.
VA Loan Assumption Questions
A common scenario for VA loan assumptions involves the following frequently asked question:
"I inherited my parents home. I want to know if I can do an assumption on the VA loan and who do I contact to do this? Will I have to pay for any fees?"
Loan assumption rules and policy for VA mortgages are found in VA Pamphlet 26-7, It is true that VA loans are assumable--but the borrower is required to work with the lender and/or get VA approval for the transaction, as instructed in VA Pamphlet 26-7:
"Transfers of ownership on properties securing loans for which commitments were made on or after March 1, 1988, must have the prior approval of the loan holder or its authorized servicing agent if either of them have automatic authority. If neither the holder nor the servicer has automatic authority, the servicer must submit a credit package to VA for underwriting."
These rules also feature instructions to the lender; how is a VA loan assumption required to be carried out? According to the VA;
"A seller must apply for approval of the transfer prior to completing the sale. (Ed. note: Emphasis ours.) Servicers and holders with automatic authority must examine the application to assess compliance with the provisions of 38 U.S.C. 3714. VA will make the determination in a case where neither the servicer nor the holder has automatic authority, following receipt of a complete application package from the servicer."
In order to successfully process the loan assumption, the VA loan "must be current or will be brought current at the closing of the sales transaction". The person assuming the loan must "be creditworthy".
What about any fees associated with VA loan assumptions? VA Pamphlet 26-7, Chapter Five states, "A processing fee may be collected in advance, including a reasonable estimate for the cost of the credit report. The maximum fee for processing a request for assumption approval and changing the loan records is the lesser of:
Automatic authority - $300 plus the actual cost of a credit report; or
No automatic authority - $250 plus the actual cost of a credit report; or
Any maximum prescribed by applicable state law."
For more information on VA loan assumptions, contact the Department of Veterans Affairs or discuss the situation with your VA loan officer.
FHA NEWS and RELATED ARTICLES
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Borrowers who have an FHA home loan for a single-family property that was endorsed on or before May 31, 2009 are eligible for a lower rate on their Up Front Mortgage Insurance Premiums.
As of spring 2012, seller FHA concessions are still limited to a total of six percent. We will report any changes to the six percent limit as they become known, but for now the six percent seller contribution limit is the official rule.
One in a series of changes implemented by the FHA in recent times is the new standards required for FHA loans regarding FICO score requirements and down payments. A 580 FICO score will now be the minimum borrower requirement.
Borrowers who are underwater on a home loan basically owe more on their home loans than the property is worth on the current housing market. Over the last few years, this has become a growing issue faced by more homeowners due to a troubled market.