Divorce And VA Mortgages

by Tim Swierczek on March 8, 2011

There are many ways in which a get­ting a divorce can have an impact on VA mortgages.

Since every veteran’s cir­cum­stances are dif­fer­ent its pos­si­ble you may need more spe­cial­ized advice, if so please con­tact usor your pref­ered lender.

First, let’s look at a sce­nario where the VA mort­gage is only filed under the veteran’s name.

The VA loans are for vet­er­ans and a vet­eran can only have one VA loan guar­entee in use at any time.  So, once the VA loan is processed, the guar­anty will remain with the mort­gage even if the bor­row­ing eli­gi­ble ser­vice mem­ber stops liv­ing there. The only way the VA loan guar­anty will be removed is if the loan is refi­nanced by the for­mer spouse into a non VA mort­gage.  That refi­nance will close out the old loan guar­entee and then make the mil­i­tary bor­rower again eli­gi­ble for a new VA mortgage.

Jointly held mort­gages are a lit­tle dif­fer­ent from the above process.

The name of each spouse is on the mort­gage, how­ever only one spouse needs to be a vet­eran or mil­i­tary ser­vice mem­ber and eli­gi­ble in order to get qual­i­fied for a VA loan. After the VA guar­anty is com­mit­ted to a mort­gage, it is no longer attached only to the vet­eran borrower.

This is what makes joint mort­gages a lit­tle tricky when it comes to divorce, espe­cially since few ex-spouses will want to main­tain a joint mort­gage together. With this in mind, there are a few poten­tial sit­u­a­tions that can arise:

  • The ex-spouses can sell their prop­erty and divide the equity or debt.
  • They can des­ig­nate sole-ownership of the prop­erty to one per­son and then refi­nance the mort­gage into the name of just one bor­rower.  If one of the spouses qual­i­fies solely.
  • If nei­ther ex-spouse can qual­ify for a loan on their own, the orig­i­nal mort­gage will remain until the prop­erty is sold. In this case, the vet­eran will not be eli­gi­ble for another VA loan as long as the orig­i­nal mort­gage remains.

After the mort­gage is ter­mi­nated, the vet­eran can apply for a new loan guar­anty. Nor­mally, there will not be any change from the orig­i­nal eli­gi­bil­ity, but the loan guar­entee could be jepordized if the ex-spouse is unable to con­tiune to make pay­ments and the loan goes into default.

It is crit­i­cally impor­tant that after the divorce a com­plete copy of the divorce decree and any pay­ments to the ex-spouse are documented.

Notes on VA-to-VA refinaces

If you have a VA loan and you’d like to get a VA IRRRL loan (also known as a VA Stream­line Refi­nance), there are also some things you should keep in mind if you are going to get divorced, mar­ried, or re-married.

Dur­ing your reg­u­lar VA loan appli­ca­tion process, each of the bor­row­ers whose names appeared on the loan was reviewed by the VA. Since VA IRRRL loans do not require a credit check, you are required to keep each bor­rower from the orig­i­nal loan on your VA Stream­line Refinance.

Unfor­tu­nately, there is no way to remove a bor­rower for a VA Stream­line Refinance.

In order to get a new VA loan dur­ing or after get­ting a divorce, you will be required to fol­low the steps of your first VA loan.

How­ever, if you are get­ting mar­ried, already have a VA loan and decide to get a VA Stream­line Refi­nance, you are allowed to add your new part­ner to the loan.

In short, if you are a vet­eran in a divorce sit­u­a­tion it is impor­tant to plan out the long term dis­po­si­tion plan on any mort­gage you aquired while being mar­ried regard­less of who will be liv­ing in the home after the divorce.

Tim Swier­czek, MMS

NMLS# 103522

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