loan assumptions require only that the assuming borrower (veteran or not) is financially qualified for the mortgage. Minimum credit score is 580 and above. Typically, 600 – 620 for most lenders. Special requirements for USDA Assumptions see below.
VA loans originated after March 1, 1988 require prior approval before a lender will allow assumption. The buyer must meet credit and income qualifications. Loans originated before that date are “freely assumable,” meaning that a homebuyer can assume the mortgage without prior approval from the VA or a VA-approved l ender. However, if the seller wants to be released from liability on the loan, the buyer must qualify to assume the loan. The VA allows unrestricted mortgage assumptions when there’s a divorce or death.
FHA Assumable Mortgages – All FHA mortgages made after December 14, 1989can be assumed. All FHA mortgages made before December 1, 1986 are assumable. This means there was only 3 years where FHA mortgages were not assumable. These FHA Mortgages can be assumed with a buyer credit approval.
The USDA permits mortgage assumption and has two different types: “new rates and terms” and “same rates and terms.” New rates and terms assumption. The homebuyer assumes the seller’s outstanding loan balance, but the loan is re-amortized with a new interest rate and loan terms. Most USDA loan assumptions fall under this category. Same rates and terms assumption. The homebuyer assumes the seller’s outstanding loan balance with the sameinterest rate and existing amortization schedule. The USDA allows this type of loan assumption in limited situations, including death or divorce.