PCS | MilitaryRelocationTypes of Ownership May 30, 2024

Understanding the VA Assumable Loan in Hawaii

Are you a military service member, veteran, or family member looking to buy a home in Hawaii? If so, you might want to explore the option of a VA assumable loan. This type of loan can be a game-changer, offering significant benefits to both buyers and sellers. In this blog post, we’ll break down what VA assumable loans are, how they work, the time it takes to complete the process, and what kind of financial commitment you’ll need to make.

What is a VA Assumable Loan?

A VA assumable loan is a mortgage that a buyer can take over, or “assume,” from the seller. This means that instead of taking out a new loan, the buyer takes over the existing loan, including its interest rate, terms, and balance. This can be particularly advantageous in a market with rising interest rates, as the buyer might inherit a lower rate than what is currently available.

How Do VA Assumable Loans Work?

Here’s a step-by-step overview of how the process works:

  1. Eligibility Check: First, ensure that the existing loan is indeed assumable. Most VA loans are, but it’s always good to confirm.
  2. Buyer Qualification: The buyer must qualify for the loan under the VA’s guidelines, which typically means meeting certain credit and income requirements.
  3. VA Approval: The Department of Veterans Affairs must approve the assumption. This involves a thorough review of the buyer’s financial situation.
  4. Transfer Process: Once approved, the loan is transferred from the seller to the buyer. This includes transferring the deed of the property to the buyer’s name.

How Long Does the Process Take?

The process of assuming a VA loan can take anywhere from 45 to 90 days. Here’s a rough timeline:

  • Initial Inquiry and Application: 1-2 weeks
  • Qualification and Approval: 3-6 weeks
  • Transfer and Closing: 2-4 weeks

It’s important to start early and stay in close communication with your lender and real estate agent to ensure a smooth process.

How Much Money Will You Need to Bring to the Table?

The amount of money a buyer needs to bring to the table can vary widely, depending on the specifics of the loan and the property. Here are some key points to consider:

  1. Equity Difference: The buyer may need to cover the difference between the loan balance and the property’s sale price. For example, if the home is selling for $500,000 and the remaining loan balance is $450,000, the buyer needs to bring $50,000 to the table.
  2. Funding Fee: VA loans typically require a funding fee, which can range from 1.25% to 3.3% of the loan amount. This fee can sometimes be financed into the loan.
  3. Closing Costs: These can include appraisal fees, title insurance, and other related costs, usually ranging from 2% to 5% of the loan amount.

Why Consider a VA Assumable Loan?

  • Lower Interest Rates: You might inherit a lower interest rate than what’s currently available.
  • Cost Savings: Reduced need for a large down payment if you can cover the equity difference.

Final Thoughts

VA assumable loans can offer a unique and advantageous route to homeownership, especially in a beautiful place like Hawaii. If you’re eligible and find a property with an assumable VA loan, it could be a perfect match for your needs. Always consult with your real estate agent and lender to understand all the details and ensure this option aligns with your financial goals.

If you have any questions or need further assistance, feel free to reach out. Happy house hunting!


Hanna Strick