Removing A Borrower From A VA Loan

Multiple borrowers can apply for a VA loan together. But, co-borrowers may have to remove one of their names if divorce or other circumstances affect the arrangement.

The VA Lender’s Handbook, VA Pamphlet 26-7, outlines the rules of the VA loan program, including those for removing a borrower’s name from a loan.

Keep in mind, state law, lender requirements and other factors may also apply.

Editor’s Note: Veteran.com does not provide legal advice. If you need legal assistance to add or someone from a legal deed or title, consult an experienced real estate or lending attorney in your state of residence.

How to Remove Someone From a VA Home Loan

The easiest way to remove someone from a VA mortgage is to refinance the loan in the remaining borrower’s name alone.

A VA Interest Rate Reduction Refinance Loan (VA IRRRL) is a simple way to achieve this.

According to the VA’s lender’s handbook, VA IRRRL loans must provide some kind of benefit to the borrower, such as a lower interest rate, lower payments or changing from an adjustable-rate mortgage (ARM) to a fixed rate VA loan.

However, there are restrictions.

The VA does not allow lenders to issue VA loans to non-military borrowers. Non-military spouses are ineligible for a VA IRRRL without a military or veteran co-borrower unless they are the surviving spouse of a service member who died as a result of their military service.

State laws may impose additional restrictions.

VA Loans, Co-Borrowing and State Law

A veteran and non-military spouse can apply for a VA loan together if they are legally married. However, the VA only guarantees a portion of the mortgage amount for a non-married veteran who applies with their non-military partner.

Marital status further applies when a veteran tries to remove a co-borrower from a home purchase loan.

VA Loan Rules vs. State Law For Deeds

When a legally married couple applies for any loan, state community property laws affect the couple’s legal standing, debt responsibility and property division during divorce.

These laws may also dictate how a borrower can remove a spouse from a VA mortgage, depending on the state the home is in. VA loan rules do not override state community property law, and the Department of Veterans Affairs does not keep track of such laws or how they may change.

Read up on community property law before you begin this process, or speak with an experienced attorney in your state.

Community property laws don’t govern nonmarried co-borrowers unless the applicants fall under state “common law marriage” definitions.

Other VA Refinancing Loans

The same parties obligated on a home purchase loan must be on any VA refinance loan, according to the VA lender’s handbook. But, you may be able to refinance a VA mortgage in a single veteran borrower’s name only if they were on the original purchase loan.

IRRRL and VA cash-out refinance loans require occupancy, so at least one borrower, their spouse or qualifying dependent children must use the home as their primary residence.

VA Loan Assumptions

If a veteran without a co-borrower wants to get out of a VA mortgage loan, VA loan assumption is an alternative option.

A VA loan assumption is not a refinance loan, but it does allow non-military veterans to assume responsibility for an existing VA mortgage, thereby releasing the original borrower from monthly mortgage payments.

Whoever assumes the loan must financially qualify for the mortgage and agree to relieve the Department of Veterans Affairs from its mortgage guarantee.

A loan assumption differs from a refinance loan in that the assuming borrower must take over the original mortgage – not a new one.

For any loan assumption, ask your lender about your liability release. Lender standards, state law, and other factors may affect your transaction.

Legally married couples who divorce can use a VA loan assumption to allow the non-military spouse to take over the home loan. It also works for unmarried borrowers when one when co-borrower wants to remain on the loan but the other wants to leave it.

VA Loan Rules for Loan Assumptions, Refinance Loans and More

Keep in mind, VA refinance loans and VA loan assumptions have no effect on property deeds. Neither do they address other regulations, requirements or ordinances for real estate transactions, legal requirements for conveyance, obligation or property ownership under state or federal laws.

VA loan rules only address deed issues when they directly pertain to VA loan requirements. The VA doesn’t keep copies of deeds, deed law or related information.

If you have questions about deeds, reach out to your local recorder’s office or a title agency.