Divorce and VA Loan Eligibility, Will I Qualify?

There are many ways in which a getting a divorce can have an impact on California VA loans.

Let’s go ahead and start off with the basics.

First, let’s look at a scenario where the  California VA loan is only applied for under the veteran’s name.

The VA loan guaranty is only available due to the veteran’s eligibility for the loan.

Divorce and VA mortgage loans in CaliforniaAfter the 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.

Jointly held mortgages are a little different from the above process.

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.

It is critically important that after the divorce a complete copy of the divorce decree and any payments to the ex-spouse are documented.

If you have a California VA loan and you’d like to get a VA IRRRL loan (also known as a VA Streamline Refinance), there are also some things you should keep in mind if you are going to get divorced, married, or re-married.

During your regular VA loan application process, each of the borrowers whose names appeared on the loan was reviewed by the VA. Since VA IRRRL loans do not require a credit check, you are required to keep each borrower from the original loan on your VA Streamline Refinance.

Unfortunately, there is no way to remove a borrower for a VA Streamline Refinance.

In order to get a new California VA loan during or after getting a divorce, you will be required to follow the steps of your first VA loan.

However, if you are getting married, already have a VA loan and decide to get a VA Streamline Refinance, you are allowed to add your new partner to the loan.

To get help in determining VA loan eligibility, contact a local California VA lender.

Authored by Tim Storm, a California VA Loan Officer specializing in VA Loans. MLO 223456. – Please contact my office at the Home Point Financial. My direct line is 949-640-3102. I will prepare custom VA loan scenarios which will be matched up to your financial goals, both long and short term. I also prepare a Video Explanation of the your scenarios so that you are able to fully understand the numbers BEFORE you have started the loan process.