Who can assume a VA loan on a New Braunfels home?
Any buyer who qualifies. You don’t have to be a veteran.
VA’s own Assumption Entitlement Acknowledgment, Form 26-10291, tells sellers that any qualified purchaser, including a non-veteran, may assume the remaining balance of a VA-guaranteed loan. Federal law, 38 U.S.C. 3714, sets the same test. The loan has to be current, and you have to qualify on credit under VA’s own underwriting standards. You also agree by contract to take on full liability for that balance and the seller’s obligations under the loan documents.
You take over the seller’s existing loan instead of getting a new one. TREC’s Loan Assumption Addendum has you assume the existing note in writing at closing, along with the obligations in the deed of trust that secures it. The addendum writes in the current monthly payment, and your first payment is the first one due after closing. So you keep the interest rate and other terms in the seller’s note unless the noteholder requires a change, which the Texas contract section covers.
Who says yes?
The company that holds or services the loan, if it has VA’s automatic authority. Under VA’s regulation, that holder examines your creditworthiness and has to advise the seller within 45 days after it receives a complete application package. VA’s 2023 circular on assumptions says the same 45 calendar days. If neither the holder nor its servicing agent has that authority, the file goes to VA for prior approval, and the regulation and the circular both give the holder 35 days from a complete application to send it.
VA-guaranteed loans committed on or after March 1, 1988 also carry a required notice under federal law saying the loan isn’t assumable without the approval of VA or its authorized agent. VA’s regulation requires that statement in at least one of the loan documents, along with a clause letting the holder call the loan due if the property is transferred without an approved assumption. So a seller who deeds you the house without an approved assumption and lets you keep paying is taking a risk with their own loan.
If you’re coming to New Braunfels on PCS orders, our military relocation checklist covers the timeline side.
What does an assumption cost you?
Plan for three main costs: VA’s funding fee, the holder’s processing fee and the gap between the price and the loan balance. Other closing charges come on top.
The 0.5% funding fee
Federal law collects a funding fee from each person assuming a VA loan under section 3714, and sets it at 0.50% of the unpaid principal balance. VA’s funding fee page lists loan assumptions at 0.5%, and VA’s regulation says the same half of one percent.
Some buyers don’t pay it. The statute and VA’s funding fee page both exempt a veteran receiving VA compensation for a service-connected disability, a veteran who would be entitled to that compensation but receives retirement or active-duty pay instead, certain surviving spouses, and an active-duty service member who shows evidence of a Purple Heart on or before closing. Ask the servicer handling the assumption to confirm whether one of these applies to you before you count on it.
The processing fee
VA’s regulation lets the holder charge a reasonable fee for processing the assumption application and changing its records. That regulation and VA’s 2024 update to its assumption circular both keep the processing fee at no more than $300, and the regulation also makes it subject to any maximum set by state law. VA describes the fee as being for the costs of underwriting, processing and closing the assumption.
Other closing charges
The processing fee isn’t the whole bill. VA’s 2024 circular update lists other charges that can be passed to the person assuming the loan, if they’re incident to the loan, including a credit report, recording fees and recording taxes, applicable taxes, hazard insurance and assessments, title examination and title insurance, and fees VA has approved in advance as local deviations. Ask the servicer for an itemized estimate of every charge as early as you can, and go over it with your agent and the title company before closing.
The seller’s equity
The loan you take over covers only what the seller still owes. Federal law has you assume the balance of the loan remaining unpaid, and VA’s form for sellers describes the buyer assuming the remaining balance. If the price is higher than that balance, you have to cover the difference.
If the seller bought years ago and the home has gained value, that gap can be large. Run it in the mortgage calculator and ask a loan officer how you’d cover it before you plan around the rate.
What happens to the seller’s VA entitlement?
It stays tied to the loan until the loan is paid in full, unless you’re an eligible veteran who substitutes your own entitlement.
VA’s Form 26-10291 tells the seller that if the assumption is approved, they’re no longer responsible for the mortgage payments, but their entitlement stays tied to the loan unless the assumption includes a substitution of entitlement. Without one, it isn’t restored until the loan is paid in full. VA’s 2023 circular says the same for an assumption without substitution and adds that the seller would not receive a restoration of entitlement.
Tied entitlement doesn’t always end the seller’s VA benefit. Form 26-10291 and VA’s eligibility page both say the seller may still have remaining entitlement for another VA-backed loan. How much is left is a question for the seller’s lender or VA.
The way around it is substitution. If you’re an eligible veteran who intends to live in the home and has enough entitlement, you can substitute yours for the seller’s, and the seller gets theirs restored. Form 26-10291 says enough means at least the same amount of entitlement available as the amount originally used to guarantee the loan being assumed. Federal law in 38 U.S.C. 3702 and VA’s eligibility page describe the same veteran-transferee substitution.
VA’s 2023 circular has the holder request a Certificate of Eligibility for a buyer who plans to substitute, to confirm there’s enough entitlement, and Form 26-10291 says the holder or servicer should get it as soon as possible. Substitution also means meeting VA’s occupancy guidelines, and if you’re on PCS orders, our post on VA occupancy rules before a PCS covers how VA’s occupancy certification works on a VA purchase loan.
For the seller, the two paths look like this.
| Assumption | Seller’s entitlement after closing | Who can do it |
|---|---|---|
| Without substitution | Stays tied to the loan until it’s paid in full | Any buyer who qualifies, veteran or not |
| With substitution | Restored to the seller | An eligible veteran who intends to live in the home and has enough entitlement |
A seller who wants to buy again with a VA loan may care a lot about which row they’re in. If you’re an eligible veteran, ask your lender to check your entitlement before you write the offer.
Release of liability is a separate question
Getting entitlement back and getting off the hook for the loan aren’t the same thing. Federal law says the seller is relieved of further liability to VA when the holder approves an assumption that meets the statute’s conditions. TREC’s Loan Assumption Addendum warns the seller that their liability to pay the assumed notes continues unless they get a release of liability from the noteholders, and tells a seller worried about future liability to use TREC’s Release of Liability Addendum. TREC’s forms list that one as the Addendum for Release of Liability on Assumed Loan and/or Restoration of Seller’s VA Entitlement.
How does a Texas contract handle the assumption?
On TREC’s Loan Assumption Addendum, form 41-3. TREC’s form page says it’s used when the buyer is assuming the seller’s existing loan. Read it before you sign, because several deadlines and exits are built in:
- Credit documents. You deliver the credit documents checked in Paragraph A within the days written there. If you don’t, the seller may terminate before they’re all furnished and keep the earnest money. If the seller decides your credit is unacceptable, they may terminate within 7 days after the deadline or delivery, whichever is later, and your earnest money is refunded.
- Loan papers. Within 7 days after the Effective Date, the seller delivers copies of the note, the deed of trust and the most recent loan statement. The form’s notice to buyers says that if you’re concerned about future adjustments, monthly payments, interest rates or other terms, you shouldn’t sign the contract without examining the notes and deeds of trust, so ask for copies before you sign.
- Balance changes. If the assumed balance at closing differs from the number in the addendum, the cash or the sales price adjusts, and a variance over the amount you write in lets either side terminate unless the other pays the excess.
- Assumption terms. Paragraph D lets you terminate and get your earnest money back if the noteholder requires an assumption fee above the amount you write in and the seller declines to pay the excess. You have the same right if the noteholder requires an interest rate above the percentage you write in, or any other change to the loan documents.
- No consent. If the noteholder doesn’t consent to the assumption, either side may terminate and your earnest money is refunded.
- Seller’s liens. Unless the seller is released from liability on the assumed note, the addendum requires a vendor’s lien and deed of trust to secure the assumption.
- Escrow. If the noteholder keeps an escrow account for taxes and insurance, the seller transfers it to you without a deficiency and you reimburse the seller for the balance.
Fill in those blanks with your agent before you sign, not after the servicer comes back with numbers, and bring in a Texas real estate attorney if any term in the addendum or the seller’s note is unclear. Our post on earnest money in New Braunfels offers covers when a buyer can get earnest money back under a Texas contract. If you’re comparing this with a new VA loan, our guide to a VA appraisal below the price covers what happens when a new loan’s VA value comes in under your price.
