Divorce and Your VA Loan - Now What

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• DIVORCE AND YOUR VA LOAN

--NOW WHAT?
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• VA loan entitlement is a benefit offered to
  eligible military members and surviving spouses.
  Military spouses are included in this benefit by
  association.

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• This distinction is important because it affects
  what happens to a VA mortgage in the case of
  divorce.

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• In a divorce, the non-military spouse loses VA
  loan rights.

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• When a VA mortgage is processed, the guaranty
  remains with the loan even if the veteran stops
  living in the home.

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• The only way to remove the VA guaranty is
  refinancing the loan into a conventional mortgage
  or selling the home so the veteran can become
  eligible for a new VA loan.

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• Jointly held mortgages are a bit different. In
  this case, only one spouse needs to qualify for
  the VA loan and the guaranty is no longer
  attached only to the veteran borrower.

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• This can introduce complications. If neither
  spouse can qualify for a new mortgage and the
  loan is not paid off by selling the home

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• the veteran will be unable to take out a new VA
  loan while the original loan exists.

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• WHAT HAPPENS TO THE VA LOAN IN DIVORCE?

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• Couples who own a home together with a VA loan
  have several options in a divorce.

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• One solution is selling the property and dividing
  any equity or debt between the spouses.

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• This option frees both spouses from the mortgage
  and allows the veteran to become eligible for a
  new VA loan.

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• Sole ownership of the home can also be designated
  to one spouse who can then refinance the mortgage
  into their name alone.

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• This option also frees the veteran from the loan
  guaranty.
• This solution is most common when it's the
  non-military spouse who will remain in the home.

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• A release of liability for credit and legal
  purposes can be requested from the VA instead.

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• In this case, the request is processed by the VA
  when the veteran and spouse are both co-borrowers
  but the co-borrower wants to be released from the
  loan.

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• To be approved for a release of liability the
  divorce must be final. The entire estate must
  remain in the former spouse's name.

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• A loan assumption or transfer may be used as
  well. In this case, the mortgage is assumed by
  the purchaser as-is with the remaining balance
  and loan term.

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• The veteran does not need lender or VA approval
  to do a loan assumption. A major downside to this
  option is the veteran is still liable for the
  loan if the purchaser defaults on payments.

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• Rather than using a loan assumption with a
  non-qualifying borrower, a better solution when
  possible, is a substitution of entitlement.

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• This is another type of loan assumption in which
  the new buyer has their own VA loan entitlement
  which is substituted for the current VA
  borrower's.

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• The veteran spouse will be free to use their VA
  entitlement to secure a new loan.

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• This option does require that the purchaser have
  an entitlement sufficient to substitute for the
  ex-spouse's VA entitlement. The home also must be
  occupied by one of them.

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• In a worst-case scenario, neither spouse can get
  a new loan after the divorce and the home is
  occupied by either spouse.

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• In this case, the veteran can't get a new VA
  mortgage until the original loan is paid off
  through refinancing, a loan assumption, or sale
  of the home.

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• Mortgage Originator Jimmy Vercellino,
  specializing in VA loans, helps veterans use
  their VA loan benefit to their greatest
  advantage.  

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• For more details call 619-350-1951. Visit the
  site at http//sandiego.valoansforvets.com/

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First Choice Loan Services Inc., DBA FCLS in CA
959 South Coast Drive, 490Costa Mesa, CA
92626 Phone [phone]
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