Assumable VA Loans: The Best-Kept Secret in Military Home Buying
Most people shopping for a home right now are laser-focused on one thing: the interest rate. And for good reason. When rates are sitting in the 6-7% range, the monthly payment on a $350,000 house looks a whole lot different than it did a few years ago when rates were hovering around 3%.
But what if you could buy a home today and keep the seller's old rate? That's exactly what an assumable VA loan lets you do. And if you're a veteran or active-duty service member, this might be the single most valuable tool in your homebuying toolkit right now.
What "Assumable" Actually Means
An assumable loan is exactly what it sounds like. You take over the seller's existing mortgage, including their interest rate, remaining balance, and repayment terms. You're not refinancing. You're not getting a brand-new loan at today's rates. You're stepping into the seller's shoes and picking up where they left off.
So if a seller locked in a 2.75% rate back in 2021, and you assume that loan, you get the 2.75% rate. On a $300,000 balance, that's roughly $800 less per month compared to what you'd pay at a 7% rate on the same amount. Over the life of the loan, that savings adds up to a staggering amount of money.
All VA loans are assumable. That's built into the program. It's not a special add-on or something you have to negotiate. It's a standard feature of every VA-backed mortgage.
Why This Matters So Much Right Now
The math is simple. Between 2020 and early 2022, millions of homeowners locked in rates between 2.5% and 3.5%. Many of those homeowners used VA loans. Those loans are still out there, attached to properties across the country, including right here in the Chicago area.
For buyers in today's market, finding a home with an assumable VA loan at one of those rates is like finding a winning lottery ticket stapled to the listing sheet. The savings aren't hypothetical. They're immediate and they're massive.
Here's a quick comparison on a $300,000 loan balance:
At 3%: Your monthly principal and interest payment is around $1,265
At 7%: That same balance costs you roughly $1,996 per month
That's over $700 a month in savings. Over a 30-year term, that gap represents more than $250,000 in total interest. Even on a remaining 20-year term, the difference is significant enough to change your entire financial picture.
How the Assumption Process Works
The process isn't quite as simple as signing a paper and getting the keys, but it's more straightforward than most people expect.
First, you find a property with an existing VA loan. The seller has to be willing to let you assume it (not all, but many are, since it can make their home more attractive to buyers). Then you apply through the lender that currently holds the loan. You'll still need to meet credit and income requirements, but the underwriting process is typically faster than a full origination.
One thing to know: you'll likely need to cover the difference between the home's purchase price and the remaining loan balance. If the home is listed at $400,000 but the remaining VA loan balance is $280,000, you need to bring $120,000 to the table. That gap can be covered with cash, a second loan, or sometimes a combination of both.
The VA charges a funding fee on assumptions, usually 0.5% of the loan balance. That's considerably less than the funding fee on a new VA purchase loan. And if you have a service-connected disability rating, the funding fee may be waived entirely.
Stacking VA Benefits for Maximum Impact
Here's where things get really interesting for military buyers. An assumable VA loan doesn't exist in a vacuum. It works alongside the other benefits that make VA loans so powerful in the first place.
No private mortgage insurance. Even if you assume a loan with a high loan-to-value ratio, you won't pay PMI. On a conventional loan, that could easily cost you $150-$300 per month on top of your mortgage payment.
No prepayment penalties. If you assume a loan and then your financial situation improves, you can make extra payments or pay it off early without any fees.
VA loan entitlement flexibility. This one is important and often misunderstood. If a veteran sells their home and a VA-eligible buyer assumes the loan, the original borrower can get their full entitlement restored. That means the seller gets their VA loan benefit back to use again, and the buyer gets a below-market rate. It's a win on both sides.
Combining with VA renovation loans. If you find a home with an assumable VA loan that needs some updating, you may be able to pair the assumption with VA renovation financing to cover improvements. That gives you a low rate and a home that fits your needs after the work is done.
What to Watch Out For
Assumable VA loans aren't without their complications. The biggest one is timing. The assumption process can take 60 to 90 days plus (sometimes even longer), because you're working with the existing lender, not choosing your own. Some lenders are slower than others, and there's not much you can do to speed things up.
The equity gap is another consideration. In a market where home values have risen significantly (which describes most of the Chicago suburbs over the past four years), the difference between the sale price and the remaining loan balance can be substantial. Not every buyer has the cash or the secondary financing to bridge that gap.
VA loans are also assumable by non-veterans, but with a catch. The seller’s VA entitlement would still be tied up with the loan because the buyer doesn’t have the eligibility to take it over. This would likely be a non-starter for most sellers, as restoring entitlement is a huge benefit and partially what makes the assumable process so attractive to sellers.
And you should know that not every listing will advertise whether the existing loan is VA-assumable. It's often something your agent has to ask about directly. That's where working with someone who understands VA loans inside and out makes a real difference.
Finding Assumable VA Loans in the Chicago Market
Assumable VA loans aren't listed on a special website or searchable database. Finding them takes legwork, local knowledge, and relationships. Your agent needs to know what to look for, what questions to ask listing agents, and how to structure an offer that accounts for the assumption process.
As a veteran-owned brokerage and the only Mil-Estate affiliated team in Chicagoland, this is something we deal with regularly at Dorazio Real Estate. We work with military / veteran buyers and sellers across the entire metro area, and we understand how VA loan assumptions fit into the bigger picture of a PCS move, a retirement transition, or a first-time purchase. We also handle referrals for military families moving in and out of the Chicago market, so if you're relocating from another duty station, we can connect you with trusted agents on the other end too.
The Bottom Line
If you're a veteran or active-duty service member buying a home in today's rate environment, an assumable VA loan is worth actively looking for. The monthly savings are real, the long-term financial impact is enormous, and when you stack it with the other built-in advantages of VA financing, you're putting yourself in a seriously strong position.
It takes a little more patience and the right team to find the right opportunity. But when the numbers work, there's nothing else in the market that comes close.
If you want to talk through whether an assumable VA loan makes sense for your situation, we're always happy to walk through the details. That's what we're here for.
