Will Divorce Affect My VA Loan Eligibility?

Divorce in itself can be a stressful time. We hope to shed some light on how it may or may not affect your VA mortgage loan.

If the VA Mortgage is Only Filed Under the Veteran's Name

A VA mortgage is only available due to the veteran’s eligibility for the loan. After a VA loan is processed, the guaranty will remain with the mortgage even if the borrowing veteran or member of the armed forces 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 conventional mortgage, which will then make the military borrower again eligible for a new VA mortgage.

If the VA Mortgage is Held Jointly

If the name of each spouse is on the mortgage, and if they both work the couple may qualify for a higher loan amount with their combined income than either would individually. 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 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.

Something that is very important after the divorce is final:

Be sure you obtain a complete copy of the divorce decree. Also, make sure that any payments to the ex-spouse are documented. It’s always a good idea to over document so that if a need arises in the future for documentation, you’ll have it on hand.