How to Assume a VA Loan in Foreclosure

By Terry Smith

Sometimes, veterans financing a home using the Department of Veterans' Affairs (VA) guaranteed home loan benefit are unable to make their payments and have the home foreclosed. When that happens, the VA attempts to recover its investment, usually by selling the house. In such cases, there are circumstances in which the buyer can assume the loan, even if that person is not a veteran, but the price has to cover the amount of the loan unless the veteran can come up with the difference.

Find a VA property in foreclosure and check to see if the owner is willing to allow you to assume the VA loan. To find specific properties that are in foreclosure, the best resource is equator.com, which lists foreclosed homes financed with VA-guaranteed mortgages. In this case, equator.com is a better resource than the local multi-listing systems (MLS), which don't usually list foreclosed properties.

Determine whether you're willing to offer a price for the home that will cover the amount of the loan remaining. If that's not the case, the original borrower will need to come up with the difference or there won't be a sale.

Locate a mortgage broker who is willing to lend you the money needed to purchase the home. If the original mortgage was issued after March 1, 1988, you must be approved to assume the loan by either the VA or the original lender.

Complete and submit a VA form 26-6381 (Release of VA Loan Liability) to release the seller from any further liability with the VA with regards to the foreclosed property.

Complete the sale through the mortgage broker.

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