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