We often see the word assume used in a negative connotation. However there is one great use of the word assume in the Northern Virginia housing market. What is it you ask?
It’s a VA loan. In the last week I’ve had three buyers close on new home purchases with VA loans. Those loans all have mortgage interest rates of 3.5% or less. A great deal in today’s market. What makes them even more attractive is when these homeowners look to sell their home the loan can be assumed by a new buyer.
Putting this in an old timers perspective. When I purchased my first home with VA benefits I assumed the homeowners 9% VA loan. Standard interest rates at the time were 17%. I saved a bundle on my monthly payment over getting a new loan. There is little doubt that mortgage interest rates will rise again in the next 3-5 years. It is far to early to know what the rates might be but an assumable VA loan with a low interest rate will be attractive to a buyer.
If you are eligible for a VA loan and are shying away from using your benefit you may want to think about the benefit of having a loan a future buyer may be able to assume in the future. The new borrower will have to qualify for the loan and need approval from the lender. It’s a step well worth taking as it releases you, the veteran from the liability of the loan and frees up your VA loan eligibility for a future purchase.