The Basics of VA Loans and Divorce
It’s no secret that divorces can be long and an often difficult process leading to a tremendous amount of compromise and pain between both parties. However, although many aspects of a divorce can be tricky, housing shouldn’t have to be, and this includes homes purchased using loans likewise. In fact, for veterans, the rules regarding a prior VA loans and divorce are simple and should be closely paid attention to, as they could either make or break the compromises these individuals and their spouses have made thus far.
When beginning the process of divorce, it is important to quickly decide who will keep the home. The reason for this is that, depending on who first received the loan and who will be keeping the house and paying the mortgage payments, there are very different procedures that must be followed. Furthermore, it will allow the couple to begin the selling process if they decide against keeping the home or how the mortgage payments will continue to be made to prevent either party’s credit score from taking a hit.
The basics of a VA home loan are quite simple: a veteran may be eligible for a VA loan if they served their full term in the military or were honorably discharged. The plus side to being married is that most VA loan applications are actually favored when the individual is married, as it means a lower likelihood that the mortgage will not be paid. When given a VA loan, the spouse married to the veteran receives all VA benefits as long as this individual remains married to the veteran.
However, once the individual is no longer married, the benefits are stripped from them entirely. The only way for them to continue to receive said benefits is if the veteran chooses to remain on the loan and continues to be liable for repaying said loan. If this is the case, the individual can live in the home and solely pay the mortgage as part of the divorce settlement. The big reason why many veterans choose to not follow down this path in divorce is due to the fact that they are unable to receive two VA loans at once, and therefore would need to find another way to pay for a house if they left the current home in possession of their ex-spouse.
With this in mind, if the individual chooses to not keep the home or the spouse can not pay for the mortgage on their own, there are two different ways that the process can go. For individuals hoping to keep the home which are, however, unable to pay the full mortgage on their own, they can refinance the home if their credit is acceptable into a longer mortgage or lower interest rate in order to make the mortgage payments more affordable.
Va Loans and Divorce: When a Couple Decides to Split
For couples that are hoping to completely separate from one another after divorce, the veteran and spouse can sell the house and then divide any acquired equity accordingly, which will also allow the veteran to be able to receive another VA loan in the future if they choose to do so.
Lastly, in the unfortunate circumstance that divorce is necessary due to the loss of the veteran, the rules actually differ quite a bit in favor of the spouse. According to the VA official site, “Surviving spouses of Veterans who died from nonservice-connected causes may also be eligible if any of the following conditions are met: The Veteran was rated totally service-connected disabled for 10 years or more immediately preceding death, or was rated totally disabled for not less than five years from date of discharge or release from active duty to date of death, or was a former prisoner of war who died after Sept. 30, 1999, and was rated totally service-connected disabled for not less than one year immediately preceding death.”
The VA also may consider eligible “the surviving spouse of a veteran who died on active duty or from service-connected causes, who remarries on or after attaining age 57 and on or after Dec. 16, 2003.” This means that the vast majority of spouses that are faced with the passing of their partner will not be stripped of their benefits and will not need to refinance the home or sell it.
In the end, divorce is never easy, and choosing who gets what often is one of the hardest parts of the process. But, when it comes to a home purchased using a VA loan, it no longer has to be. As long as both parties are aware of the law and how to go about each option in an efficient manner, this typically stressful housing settlement can be decided and acted upon in little-to-no-time at all, and you and your ex can begin your new lives with a clean slate and a sense of positivity in your lives.