A veteran wants to assume an existing VA loan on a property they are purchasing. The original borrower still has other VA-financed properties. What happens to the original borrower's entitlement?
Correct Answer
B) Entitlement remains tied up until the assuming borrower pays off the loan
When a VA loan is assumed by a non-veteran or veteran who doesn't substitute their entitlement, the original veteran's entitlement remains tied to that loan until it is paid in full, even though they are no longer liable for the debt.
Why This Is the Correct Answer
When a VA loan is assumed by a non-veteran or veteran who doesn't substitute their entitlement, the original veteran's entitlement remains tied to that loan until it is paid in full, even though they are no longer liable for the debt.
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A borrower has a current mortgage balance of $150,000 and wants to refinance to a new loan of $175,000. After paying off the existing mortgage and closing costs of $3,000, they will receive $22,000 in cash. What is the primary regulatory concern with this transaction?