If you or your significant other is an active duty service member or Veteran, you may be planning to use a VA Home Loan to buy a house. And that’s a good decision: there are many significant benefits to the VA Home Loan product -- including up to no down payment and more flexible credit eligibility. But there are also some limits when it comes to who can use them. For example, what happens if you get divorced from the qualifying servicemember? Or, what if he or she dies?
To explore this topic further, we asked Andrew Hicks, Senior Operations Manager for AAFMAA Mortgage Services LLC (AMS), to provide some details.
AMS: Can you buy a house using a VA Home Loan with someone you’re not married to?
AH: Yes, there are lenders including AMS that will make a “joint loan” for a servicemember or Veteran and a non-spouse, non-veteran co-borrower. While this scenario is possible, the loan looks a bit different than normal VA mortgages because the VA's guaranty extends only to the Veteran's portion of the loan (half in most cases). With joint VA loans, the non-veteran co-borrower will often need to make a down payment to cover their portion of the loan.
How about applying jointly with your spouse?
The VA guidelines recognize legally married spouses of qualified Veterans as co-signers on VA loans, and lenders can include their income. These loans can be fully guaranteed by the VA. Both borrowers on the loan will need to meet the VA’s guidelines on income and debt.
What about two VA-eligible borrowers (married or unmarried)?
They would have some options. They could use all of one borrower’s entitlement and save the other for future use. They could split their entitlement evenly. Or they could combine the remaining entitlement of one borrower from a previous VA Home Loan with the remaining entitlement of the other borrower. This is something your AMS Military Mortgage Advisor can help you with.
Can a surviving spouse get a VA Loan if the Veteran passes?
Yes, in some circumstances. A widow/er spouse can be eligible for a VA Home Loan if they are:
● An unremarried surviving spouse of a Veteran who died in service or from a service-related disability.
● A spouse of a service member who was missing in action or a prisoner of war for at least 90 days (limited to one-time use only).
● A surviving spouse of a Veteran who was rated totally disabled (for not less than five years from date of discharge or release from active duty to date of death) and was eligible for disability compensation at the time of death from any cause.
What happens to a VA Home Loan if the VA-eligible borrower dies?
The surviving spouse, where applicable, would assume the debt. In cases where the borrower dies but has no co-borrower or surviving spouse, the Veteran's estate would be responsible for the VA-guaranteed mortgage.
What happens with the loan eligibility when married spouses/co-owners get divorced (where only one is VA-eligible)?
If you are an ex-spouse of a servicemember, you are not eligible for a new VA loan in the same way a surviving spouse would be. The VA has very strict occupancy requirements on who can and cannot live in a home purchased using a VA loan. However, if the civilian spouse is a cosigner, they are eligible to remain in the home without the servicemember living there. The issue that arises is entitlement. The servicemember cannot restore their entitlement unless their ex-spouse refinances and/or pays off the VA loan in full.
If the Veteran is divorcing, but keeping the house, how do they remove the spouse from the title?
The simplest way to remove someone from a VA mortgage is to have the loan refinanced into the name of the remaining borrower(s) alone. You can apply for a VA Interest Rate Reduction Refinance Loan (VA IRRRL) which must provide some kind of benefit to the borrower in the form of a lower interest rate, lower payments, or the ability to move out of an adjustable rate mortgage into a fixed-rate VA loan.
Are surviving spouses with or without a VA Home Loan still eligible for AAFMAA Membership?
Yes, absolutely. That’s one of the main reasons servicemembers and Veterans join AAFMAA. They know we’re committed to helping their spouse during deployment and in the event of their death. This is a role we take very seriously and is one of the benefits of using a Military Mortgage Advisor who is familiar with the military lifestyle and VA benefits in general.
We’re Here to Help
If you’re not certain about whether or not it’s the right time to purchase a home, or refinance your existing mortgage, please contact us online today or give us a call at 844-218-6926. An AMS Military Mortgage Advisor will be happy to provide you with an honest and fair comparison of your mortgage options, including a wide range of low-rate and low-cost mortgages designed to meet your needs.
Ensuring our Members obtain the best mortgage possible is our mission. Get your free mortgage assessment today!
For more information about how AAFMAA continues supporting the military community during the COVID-19 crisis visit www.aafmaa.com/COVID19.