VA Loans for Children of Veterans

Can VA loans be approved for the children of veterans? It’s a common question. The VA home loan program is a major benefit for military members and families. This benefit allows a military member with qualifying military service to apply for a zero-down home loan guaranteed by the federal government.

The guarantee makes the loan easier to approve for the lender due to the reduced risk. That guarantee also allows the lender to offer mortgages with more forgiving credit requirements than conventional loans.

With the VA home loan program come questions–is this program similar to other VA benefits which may be transferable to a spouse or dependent? The short answer is no, VA loan benefits are not transferable to children.

But that does not mean that a spouse or dependent can’t live in the home purchased with a VA loan, and it does not mean the home is not transferable to a spouse or dependent under the proper circumstances.

VA Loan Basics

The essence of the VA loan program is that it is aimed specifically at the military member or veteran. When a veteran applies for a home loan with non-veterans who are not the spouse (that becomes important as we’ll see below), the VA only guarantees the veteran’s portion of the loan.

The non-military co-borrowers don’t have the no-money-down option, they are not protected by VA policies, and in essence the VA loan on a transaction like this is for the service member or veteran only. No VA benefits are offered to the non-veterans/non-military in the transaction.

Who Qualifies For A VA Mortgage?

According to the VA official site, the following people qualify for VA home loan consideration:

• Military members with minimum qualifying service (varies depending  on dates of entry to military duty)
• U.S. citizens who served in the armed forces of a government allied  with the United States in World War II
• Qualifying surviving spouses of military members who died as a result of military service
• Members of certain organizations, such as Public Health Service officers, cadets at the United States Military, Air Force, or Coast Guard Academy, midshipmen at the United States Naval Academy
• Officers of National Oceanic & Atmospheric Administration, merchant seaman with World War II service

VA Loans Between Spouses And Military Members/Veterans/Retirees

Forget everything in the VA Loan Basics section above when it comes to VA home loans between military and spouse.

The VA treats married couples differently–the VA home loan is offered to a legally married couple with full VA loan benefits and no exclusions just because the spouse is a civilian. That means the full VA loan benefit is available to married couples if they have never used the VA loan program before.

VA Loans Between Military Members And Dependent Children

At press time, dependent children are not treated the same as spouses, which means that any VA loan applied for by parent and child would be treated as though one civilian and one military member were applying for the loan.

In such cases, as mentioned above in VA Loan Basics, the veteran’s portion of the loan is guaranteed by the VA and subject to VA loan rules, but the civilian portion of the loan has no VA involvement. Remember, VA home loans don’t allow a cosigner to offset low FICO scores or bad credit information–all applicants must financially qualify for the loan with credit scores and loan repayment history (among other factors) under VA loan rules.

Can Dependent Spouses Or Children Apply For VA Home Loans On Their Own?

Dependent children who have no qualifying military service have no access to VA loans on their own in spite of their status as military dependents. Spouses generally have no ability to apply for VA loans without the service member under most conditions.

However, surviving spouses of military members who died as a result of military service may be eligible but this is not automatic. You must apply for VA home loan eligibility through the Department of Veterans Affairs.

Can I Sell Or Transfer The Home I Purchased With A VA Mortgage?

VA home loan rules are similar to other government-backed mortgages in that those rules permit the free sale or transfer of property to others. You may sell your home to whomever you please, and this includes dependents and spouses or ex-spouses.

Transferring the home can be a bit more complicated, especially if a VA loan assumption is involved. Loan assumptions for VA mortgages are possible with the participation of the lender. In the past, VA loan rules have been issued to address loan assumptions, including the following from the VA Lender’s Handbook (VA Pamphlet 26-7):

“Under certain circumstances, properties that are security for VA-guaranteed loans may be sold even though the loans are not paid in full. Borrowers who sell their properties under these conditions remain liable to VA for any loss that may occur as a result of a future default and subsequent claim payment,” unless the home is sold “to a creditworthy purchaser who agrees to assume the payment obligation”.

Another Option: VA Vendee Financing

VA Vendee Financing is a program that allows the purchase of repossessed homes that were originally purchased with VA mortgages. These homes go into foreclosure and become the property of the VA as “Real Estate Owned” properties or REO properties.

VA Vendee Financing offers qualified borrowers (including non-military members, investors, etc.) the ability to purchase one of these REO properties with little or no money down.

The VA official site describes Vendee Financing as “a viable alternative to traditional financing” and most closing costs may be added to the loan amount for 15-year and 30-year loans. There is no VA-required appraisal, interest rates are said to be “competitive” and there is no requirement for mortgage insurance. You can learn more about these loans via the VA’s REO partner, VRM Mortgage Services.

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Joe Wallace is a 13-year veteran of the United States Air Force and a former reporter for Air Force Television News

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