How to Use a VA Loan to Assume a Loan

By Ketly Hinojos

A Veterans Affairs (VA) loan is administered by the U.S. Department of Veterans Affairs. All active and past veterans with honorable discharge from the various U.S. military branches (Army, Navy, Marines and the U.S. Coast Guard) are eligible for a VA loan. Most veterans use their loan to obtain a home loan or to refinance their home. There are two important advantages to using your VA loan to obtain a home loan. You do not need a down payment, and the interest rate offered with a VA loan is lower than a conventional loan. Using your VA loan can be a bureaucratic nightmare, but it does not have to if you know what you need.

Find out if the lender accepts VA loans. Before you use your VA loan to assume a home loan, it is important to find out if the lender participates in the VA loan program. Most lenders participate in the VA loan program because many find the VA loan applicants appealing, since the loan is back by the U.S. government. If the lender does participate in the VA loan program, make sure you have on hand the Certificate of Eligibility, VA Form 26-1880 to confirm your eligibility. If you're no longer an active member of the military and desire to use your VA loan, then in addition to providing the eligibility form, you must provide your discharge papers or form DD form 214.

Find out how much you can borrow. The VA loan program does not have a set limit on the amount you can borrow; however, limits are set based on the county that you live in. Although the VA loan is backed by the government and the loan amount is guaranteed 100 percent financing, the lender does determine how much you can afford based on your income, credit history and the county you live in. The typical limit on the amount you can borrow depending on the county is $417,000 to $1 million.

Obtain an appraisal of the home. An appraisal of the home you choose is required to determined how much the home is really worth. VA appraisal of the home is typically very conservative, and if your lender is a participant of the VA's Lender Appraisal Processing Program (LAPP), the lender can review the appraisal done by a VA appraiser and approve the loan right away. If the lender is not part of the LAPP database, then the application goes to the VA office for final approval.

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