In a high-rate environment, assuming a VA loan is one of the smartest ways to save hundreds—or even thousands—on your monthly mortgage payment.
What is a VA Loan Assumption?
A VA loan assumption allows a buyer to take over a seller’s existing Kansas City VA home loans, effectively inheriting a lower interest rate while saving on closing costs. This includes the remaining balance, the repayment schedule, and—most importantly—the original interest rate. If a seller locked in a 2.75% rate in 2021, you could step into their shoes and keep that rate in 2026, regardless of current market trends.
Unlike almost any other mortgage product, VA loans are “inherently assumable,” meaning the lender cannot stop the transfer if the buyer meets credit and income requirements.
Who Can Assume a VA Loan?
A major benefit of this program is its flexibility. You do not necessarily have to be a Veteran to assume a VA loan:
- Qualified Veterans: Can assume the loan and “substitute” their own entitlement for the seller’s.
- Non-Veterans (Civilians): Can also assume a VA loan, provided they meet the lender’s credit and income standards. However, there are specific risks for the seller’s future entitlement in this scenario.
The “Equity Gap” Challenge
While you are inheriting a low rate, you are only assuming the balance of the loan. In Kansas City, where home values have risen significantly, there is often a gap between the loan balance and the sale price.
If the equity gap is too large to cover with cash, some buyers choose to finance the full purchase price using a VA Jumbo Loan instead, which allows for $0 down even on high-value homes. However, if you stick with the assumption, secondary financing (a second mortgage) is permitted as long as it is subordinate to the VA first lien and fits within your debt-to-income (DTI) ratios.
Substitution of Entitlement (Important for Sellers)
If you are a Veteran selling your home via assumption, you must be careful with your VA loan entitlement:
- Veteran Buyer: If the buyer is a Veteran with sufficient entitlement, they can “substitute” theirs for yours. This restores your full benefit immediately so you can buy your next home with $0 down.
- Civilian Buyer: If a civilian assumes your loan, your entitlement stays “tied” to that house until the loan is paid off. This could limit your zero-down buying power for your next purchase.
Costs and Fees for Assumptions
Assumptions are generally much cheaper than new loans. Key costs include:
- VA Funding Fee: Only 0.5% for assumptions. You can find more details on funding fee exemptions here.
- Processing Fee: Lenders are capped at a reasonable fee (typically $300 plus a regional variance for Kansas/Missouri) to process the assumption.
- No Appraisal: In many cases, a new VA appraisal is not required, saving you $600–$900.