VA vs. FHA Assumptions – What Buyers & Sellers Need to Know

Andrew Georgitsis
Sep 19
3 min read

🌟 Why This Comparison Matters

VA and FHA loans are the two most common government-backed mortgages with assumable features. They each offer big advantages to buyers looking for lower interest rates and to sellers who want to market their home more aggressively. But the rules are slightly different. Here’s how VA and FHA assumptions compare — and how to decide which one fits your situation.

🏠 Primary Residence Rules

VA: If the buyer uses their own VA entitlement, the home must be occupied within 60 days of settlement. But if the seller allows the buyer to use the seller’s entitlement, there’s no primary residence requirement, opening the door for non-veterans and investors.
FHA: All FHA loans require the borrower to establish principal residence within 60 days of settlement and continue occupancy for at least one year.|

🎖 Entitlement

VA: Every VA loan has a veteran’s entitlement tied to it. If the buyer is a veteran, they can substitute their own entitlement for the seller’s. Sellers may also leave their entitlement attached to the home so that a non-veteran can assume the loan.
FHA: There’s no entitlement component. Any buyer with an SSN (including resident aliens) who meets HUD and lender qualifications can assume an FHA loan.

⏱ Closing Time

VA: Lenders must issue a decision within 45 days of receiving an assumption package. With new VA policies and lender efficiencies, most VA assumptions close in 45–60 days after contract ratification.
FHA: Servicers must complete their review within 45 days after receiving all necessary documents, but FHA assumptions generally close in 60–75 days after contract ratification.

💵 Assumption & Processing Fees

VA: The VA charges a flat assumption fee of 0.5% of the loan balance to buyers (waived for disabled veterans, surviving spouses, and purple heart recipients). Lenders may also charge between $636 and $713 depending on region.
FHA: As of May 2024, the maximum allowable processing fee for FHA assumptions is $1,800, designed to incentivize lenders to expedite the process.

🛡 Mortgage Insurance

VA: VA loans don’t require mortgage insurance at all — regardless of down payment, loan amount, or purchase price.
FHA: FHA loans may require mortgage insurance (MI). For loans issued after June 3, 2013, MI can be removed after 11 years if the original down payment was at least 10%. For down payments under 10%, MI remains for the life of the loan.

💳 Second Mortgage Options

VA: The VA doesn’t restrict buyers assuming a VA loan from obtaining a second mortgage, whether they’re veterans or non-veterans. Some servicers may have internal restrictions, but VA guidelines allow it.
FHA: The FHA also does not impose restrictions on second mortgages, though individual servicers may.

🚀 Bottom Line

Both VA and FHA assumptions can dramatically reduce a buyer’s monthly payment compared to taking out a new mortgage. For sellers, advertising a low-rate assumable mortgage can bring in more offers and higher net proceeds.

At SoCal Realty & Investments, we specialize in assumable loans and can guide you through the differences between VA and FHA assumptions, handle the paperwork, and even identify homes currently available with these loans.