VA home loan mortgages are for military members and veterans who meet requirements set by the Department of Veterans Affairs, but what about a divorcing, 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 The House?
This is a tricky question to answer since it depends partially on state law, but also on the language of the legally binding mortgage contract and whether or not the spouse is obligated on 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 standing of the spouse where the home loan is concerned would be an important factor.
Can A Divorced, Non-Military Spouse Who Keeps The Home Refinance With A VA Mortgage?
In general, VA loan rules state that the same parties obligated on the original mortgage must be obligated on the refinance loan. For example, a veteran and spouse who refinance will have not issues assuming they are eligible and otherwise qualified.
But if the veteran does not apply for the VA refinance loan when the spouse tries to “go it alone”, a VA guarantee to refinance the loan is generally not possible for someone not named on the first mortgage, and who is not eligible for VA home loan benefits, apart from the standing of the legal marriage.
According to VA Pamphlet 26-7, the following people can 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 of the most common-the divorced, non-military spouse keeps the home and is making the mortgage payments. He wants to refinance the property using a VA Interest Rate Reduction Refinance Loan (VA IRRRL) to get into lower monthly payments.
However, without the participation of the military ex-spouse, this would not be possible. “…(T)he divorced spouse is keeping the home and wishes to refinance. The spouse cannot get an IRRRL unless the veteran agrees to be obligated on the new loan and commit his or her entitlement to the new loan. A person without entitlement cannot get an IRRRL or any other type of VA loan.”
Can A VA Refinance Loan Be Issued To Buy Out A Divorced Spouse?
The eligible veteran may apply for a VA refinance loan to buy out the spouse’s share of the home in cases where the couple applied for the VA mortgage together once legally married. Lender standards, state law, and other factors may apply. You will need to speak to a participating VA loan officer to determine what is possible depending on circumstances, state law, and the terms of your loan agreement.
Your lender may require you to furnish documentation showing the loan is sustainable with only one borrower if there was more than one borrower on the original mortgage.
Does The Divorcing Non-Military Spouse Have Any Right To The Home?
There are too many variables to give a definitive answer to this question-much depends on the original loan agreement, state community property laws where applicable, whether the non-military spouse has a financial stake in the home or is obligated on the note, and much more.
The simplest way to remember how VA loans work for non-military members is that VA loan entitlement, the ability to use or re-use VA loan benefits, and the ability to purchase or refinance a home using VA loan benefits is tied specifically to the military member.
The non-military member’s options are limited to what is permitted by law or in the legally binding loan contract.
Veterans and non-military spouses alike should consider legal counsel with experience in military divorce cases when dealing with issues like VA home loans, ownership of the property, and final disposition of the loan. Moving forward without the benefit of (experienced) legal counsel may be to the petitioner’s detriment.
The Department of Veterans Affairs permits financially qualified applicants to assume a VA home loan from the original borrower. This is important for military members experiencing divorce-it’s important to know the following rule from VA Pamphlet 26-7:
In certain instances, a veteran may seek release from personal liability when his or her former spouse acquires the property as the outcome of divorce proceedings and the ex-spouse was jointly liable on the loan with the veteran prior to the divorce.
In other cases, the veteran, “may be awarded the property and the ex-spouse may seek a release of liability.”
Most VA loans today will require the participation and approval of the lender, so you will need to discuss your desires with the loan officer to see what is possible regarding VA loan assumptions as an alternative to refinancing or getting legal title to the property in some other way.
VA Loan Rules Aren’t The Only Regulations For VA Home Loans
Eligible VA borrowers who live in community property states will find that state law dictates how VA loans may proceed. Community property laws could be viewed as a “states rights” and factor in that each state has its’ own way of doing things and community property laws dictate who has the obligation of debts incurred in a legal marriage.
You may find that community property laws require the spouse’s participation in the initial loan process, but the degree of obligation beyond that point will depend on state law. In short, you’ll need to know the laws of your state before applying for a VA mortgage with a spouse.
This is also true of getting a divorce while you are still paying on a VA mortgage. State law will dictate how that financial obligation is to be treated in the divorce if the couple does not reach an arrangement on their own. (In some cases, the couple’s agreement may be overruled by state law regardless.)
VA Home Loan Rules For VA Loan Eligibility
The VA lender’s handbook, VA Pamphlet 26-7, discusses who is eligible to apply for a VA mortgage, refinance loan, construction loan, etc. The VA loan rulebook makes it clear that the VA loan benefit is specifically tied to the veteran. This is an important detail to remember when considering divorce issues between military and non-military spouses.
That does NOT mean that spouses cannot be homeowners, co-borrowers or co-signers on a VA mortgage. VA loan rules permit 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 the non-military spouse can apply for a VA loan together with full VA entitlement.
- The veteran and a military spouse may apply for a VA loan and use VA loan benefits from both military members.
- The veteran and a military spouse may apply for a VA loan using only one military member’s VA loan benefits.
- Certain qualifying 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 those declared Missing in Action (MIA) or who are declared Prisoners of War (POW).
- The veteran and any non-qualifying military member who is not a legal spouse can apply for a VA mortgage together, but the VA will guarantee only the military member’s portion of the mortgage.
Joe Wallace is a 13-year veteran of the United States Air Force and a former reporter for Air Force Television News