A VA loan can be taken over by the person who buys the home. When rates have risen since the loan was made, that can be worth a great deal to a buyer. The law sets out exactly when an assumption must be approved and how the seller gets released, and skipping a step can leave the seller on the hook.
Under 38 U.S.C. 3714, when the owner sells and notifies the loan holder in writing before the sale, the holder must approve the assumption if two things are true:
No missed payments at the time of the assumption.
The buyer is contractually bound to assume the full balance and all of the seller's obligations, and qualifies from a credit standpoint as if they were a Veteran applying for a VA loan of that amount.
When approved, the seller is relieved of all further liability to VA on the loan, including for any later default by the buyer. The buyer does not have to be a Veteran.
The holder must tell both the seller and VA, and tell the seller they can appeal to VA. On appeal, VA reviews whether the loan is current and the buyer qualifies. If the buyer does not qualify, VA can still direct approval in a hardship case: the seller cannot make the payments, made reasonable efforts to find a qualified buyer, asks within 15 days, and stays secondarily liable.
Without an approval or an appeal within 30 days, the holder may demand full payment of the loan if the property is sold. Selling without notifying the holder first allows the same demand.
The VA loan fee on an assumption is 0.5 percent of the unpaid balance on the date of transfer, under the fee table in 38 U.S.C. 3729.
A release of liability is not the same as getting your entitlement back. Unless a Veteran buyer substitutes their own entitlement, yours stays tied to the loan. See restoring entitlement.
What a lender may charge on a new VA loan is covered on closing costs and fees; who qualifies to use the benefit is on eligibility.
The law: 38 U.S.C. 3714(a)-(b), 3729(b) loan fee table (loan assumption) and 3702(b)(2). Not legal advice; VA decides eligibility. Not a commitment to lend.
A short call checks your eligibility, what your service qualifies you for, and what the law lets a lender charge you, before you commit to anything.