VA Loans and DivorceUpdated: December 23, 2022
VA loans are designed for military members and veterans who meet Department of Veterans Affairs requirements.
Nonmilitary spouses who are married to eligible veterans and military members can share in their partner’s VA entitlement and loan benefit. But, divorce can complicate a spouse’s VA loan eligibility and property rights. Here’s what you need to know about VA loans and divorce.
Can a Divorced, Nonmilitary Spouse Keep the VA Mortgage and the House?
Assuming a mortgage loan after divorce depends on state law and whether the spouse is listed on the home’s title and original mortgage contract.
Nonmilitary spouses who aren’t listed as legally obligated on the loan contract or title of the home can not assume VA mortgages.
Can a Divorced, Nonmilitary Spouse Keep the Home and Refinance with a VA Mortgage?
The same parties obligated on a home’s original mortgage must be obligated on a refinance loan, according to VA loan rules. For example, a veteran and spouse who refinance will not have any issues, assuming they are eligible and otherwise qualified.
However, if a nonmilitary spouse tries to refinance a VA loan without their veteran spouse, the VA will not approve the refinance.
Nonmilitary spouses can only receive VA home loan benefits alongside their eligible military or veteran spouse. So, if your spouse bought a house with a VA loan, you can be listed on the loan. But, you can’t pursue a VA loan on your own.
Here’s who can apply for a VA-guaranteed refinance loan of the original VA mortgage, according to VA pamphlet 26-7, the lender’s handbook.
- The veteran alone.
- The veteran and spouse.
- The veteran and a new spouse.
A divorced, nonmilitary spouse who was listed on the loan and home title can keep the home, as long as they continue to make mortgage payments. If they want to refinance their home with a VA Interest Rate Reduction Refinance Loan (IRRRL) to get lower monthly payments, their military or veteran ex-spouse must agree to commit their entitlement on the new IRRRL. Put simply, a person without VA entitlement can not get any kind of VA loan or VA refinance loan on their own.
Can I Use a VA Refinance Loan to Buy Out a Divorced Spouse?
An eligible veteran may apply for a VA refinance loan to buy out a divorced spouse’s share of their home if the couple applied for the VA mortgage together after they were legally married.
However, lender standards, state law, and other factors may apply in these cases. Speak to a VA loan specialist to determine what is possible depending on circumstances, state law, and your loan agreement terms.
Your lender may require you to provide documentation showing you can continue to sustain your loan by yourself if your ex-spouse was listed as a co-borrower on the original mortgage.
Does the Divorcing Nonmilitary Spouse Have Any Right to the Home?
A divorced nonmilitary spouse’s right to a home depends on several factors, including the original loan agreement, state community property laws (where applicable) and whether the nonmilitary spouse has a financial stake in the home or is obligated on the contract.
How VA Loans Work for Nonmilitary Members:
Remember, a nonmilitary spouse’s VA loan entitlement and ability to use or reuse VA loan benefits to purchase or refinance a home only exist in connection with the military member or veteran.
Applicable laws and legally binding loan contracts limit the nonmilitary spouse’s options after a divorce.
Veterans and nonmilitary spouses should consider seeking legal counsel from an attorney who is experienced with issues like VA home loans, property ownership and final loan disposition in military divorce cases.
VA Home Loan Assumption for Divorced Spouses
The VA permits financially qualified applicants to assume a VA home loan from the original borrower. Here’s what VA Pamphlet 26-7, the lender’s handbook, says about military members experiencing divorce:
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 handbook states, the veteran “may be awarded the property and the ex-spouse may seek a release of liability.”
Ultimately, your lender must facilitate any VA loan option. Discuss your circumstances with your loan officer to see if a VA loan assumption is a viable alternative to refinancing or gaining a property’s legal title in some other way.
VA Loan Rules Aren’t the Only Regulations for VA Home Loans
State laws dictate who has the obligation of debts incurred in a legal marriage and how VA loans may proceed during a divorce.
In community property states, property acquired during a marriage belongs equally to each spouse, according to Cornell Law School’s Legal Information Institute. In states with equitable distribution, elective share or separate property laws, a judge divides a married couple’s assets, giving each a percentage of a property’s value. Portions may not be equal.
Look up your state’s laws before applying for a VA mortgage with a spouse.
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 or construction loan.
The VA makes it clear that the VA loan benefit is specifically for qualifying veterans. That does not mean that spouses cannot be homeowners, co-borrowers or co-signers on a VA mortgage. Legally married couples where one spouse is not a military member or veteran can cosign or co-borrow on a VA loan together.
The ability to successfully apply for a VA home loan depends on the legal marriage relationship. Here are a few possible borrowing scenarios :
- The veteran and the nonmilitary 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 both military members’ VA loan benefits.
- 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 or spouses who are declared prisoners of war.
- 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.