VA home loan mortgages are available to military members and veterans who meet department of veterans affairs requirements, but what about a divorce, non-military spouse of a veteran? What happens to a VA loan when a couple divorces? The VA home loan is intended for military members who meet minimum requirements. Certain surviving spouses may be eligible for the VA loan benefit at the discretion of the department of veterans affairs. But what about the divorced, non-military spouse of a veteran?
Can a divorced, non-military spouse keep the VA mortgage and house?
This is a tricky question because it depends in part on state law, but also on the language of the legally binding mortgage agreement and whether or not the spouse is obligated to the mortgage.
In cases where a non-military spouse is not legally obligated on the loan or listed on the title of the home, the non-military spouse would not be able to become responsible for the VA mortgage. The legal status of the spouse when it comes to the home loan would be an important factor.
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Can a divorced, non-military spouse who keeps the house refinance with a VA mortgage?
Generally, VA loan rules state that the same parties obligated for the original mortgage must be obligated for the refinance loan. For example, a veteran and a spouse who are refinancing will have no problem, provided they are eligible and otherwise qualified.
But if the veteran does not apply for the VA refinance loan when the spouse is trying to "go it alone," a VA guarantee to refinance the loan is generally not possible for someone who is not named on the first mortgage, and who is not eligible for VA home loan benefits, except for the status of the legal marriage.
According to VA pamphlet 26-7, the following may apply for a VA-guaranteed refinance loan of the original VA mortgage:
- The veteran alone
- The veteran and spouse
- The veteran and a new spouse
The VA lender's handbook cites one of several possible circumstances, but this is among the most common – the divorced, non-military spouse keeps the house and makes the mortgage payments. He wants to refinance the property with a VA interest rate reduction refinance loan (VA IRRRL) to get lower monthly payments.
However, this would not be possible without the involvement of the military ex-spouse. "…(T) the divorced spouse keeps the house and wants to refinance. The spouse cannot receive an IRRRL unless the veteran agrees to be obligated for the new loan and to commit his or her claim to the new loan. An individual without an entitlement cannot receive an IRRRL or other type of VA loan."
Can a VA refinance loan be issued to buy out a divorcing spouse?
The eligible veteran can apply for a VA refinance loan to buy out their spouse's share of the home if the couple applied jointly for the VA mortgage once legally married. Lender standards, state law and other factors may apply. You will need to speak with a participating VA loan officer to determine what is possible depending on the circumstances, state law and the terms of your loan agreement.
Your lender may require that you provide documentation showing that the loan is sustainable with only one borrower if more than one borrower participated in the original mortgage.
Does the divorced non-military spouse have a right to the apartment?
There are too many variables to give a definitive answer to this question – much depends on the original loan agreement, state property laws, whether the non-military spouse has a financial interest in the home or is obligated on the note, and more.
The easiest way to remember how VA loans work for non-military members is that VA loan eligibility, the ability to use or reuse VA loan benefits, and the ability to buy or refinance a home with VA loan benefits are specifically tied to the military member.
The nonmilitary member's options are limited to what is permitted by law or the legally binding loan agreement.
Veterans and non-military spouses alike should consider legal counsel with experience in military divorce cases when dealing with issues such as VA home loans, ownership of the property and final disposition of the loan. Moving forward without (experienced) legal counsel may be to the petitioner's disadvantage.
VA home loan assumptions
The department of veterans affairs allows financially qualified applicants to accept a VA home loan from the original borrower. This is important for military members who are getting divorced – it is important to know the following rule from the brochure 26-7:
In certain cases, A veteran may seek relief from personal liability if his or her former spouse acquires the property as a result of a divorce proceeding and the ex-spouse was jointly liable with the veteran for the loan prior to the divorce.
In other cases, the veteran "can get the property and the ex-spouse can apply for a liability release."
Most VA loans today require lender participation and approval, so you'll need to discuss your wishes with the loan officer to see what's possible in terms of VA loans, as an alternative to refinancing or claiming title to the property in other ways.
VA loan rules aren't the only rules for VA home loans
Eligible VA borrowers living in community property states will find that state law dictates how VA loans may proceed. Community property laws could be considered "state's rights" and factor because each state has its own way of doing things, and community property laws dictate who has the obligation to debts incurred in a legal marriage.
You may find that community property laws require spousal participation in the original loan process, but the degree of commitment beyond that depends on state law. In short, you need to know your state's laws before applying for a VA mortgage with a spouse.
This also applies to a divorce while you are still paying a VA mortgage. State law prescribes how this financial obligation is to be handled in the event of divorce if the couple themselves fail to reach an agreement. (in some cases, the couple's agreement may be overridden by state law).)
VA home loan rules for VA loan eligibility
The VA lender's handbook, VA pamphlet 26-7, discusses who is eligible to receive a VA mortgage, refinance loan, construction loan, etc. To apply. The VA loan rulebook makes it clear that the VA loan benefit is specifically tied to the veteran's. This is an important detail to remember when considering divorce issues between military and non-military spouses.
This does NOT mean that spouses cannot be homeowners, co-borrowers, or co-signers on a VA mortgage. VA loan rules allow for a legally married couple where one spouse is not a military member.
The ability to successfully apply for a VA home loan depends on the legal marriage relationship in the following ways:
- The veteran and non-military spouse can apply for a VA loan along with the full VA entitlement.
- The veteran and a military spouse can apply for a VA loan and use VA loan benefits from both military members'.
- The veteran and a military spouse can apply for a VA loan using only a military member's VA loan benefits.
- Certain qualified surviving spouses of military members who died as a result of military service may apply for a VA home loan. This may also apply to spouses of missing in action (MIA) or prisoners of war (POW).
- The veteran and any non-qualified military member who is not a legal spouse can jointly apply for a VA mortgage, but the VA only guarantees the military member's portion of the mortgage.
Joe wallace is a 13-year veteran of the united states air force and former reporter for air force television news