A Department of Veterans Affairs (VA ) home loan application is filed under the name of the veteran himself or herself. Even on a joint mortgage, the loan guaranty is available only because of the veteran's status with the VA. Once the loan is processed, though, the VA guaranty stays with the existing mortgage. It will remain with the mortgage even if the veteran moves out of the home. Only if the mortgage is altered through refinance can the VA loan guaranty be removed, rendering the veteran eligible for the benefit on the future mortgage.
Securing a VA Home Loan on a Joint Mortgage
A joint mortgage carries the names of both individuals in a marriage. The incomes of the two spouses are added together in order to determine a higher mortgage limit. If one of the members of the marriage is a veteran, then he or she may qualify for the VA home loan guaranty. This is like insurance on the mortgage; the VA promises to buy the loan out of default should default occur. This reduces the expense on the mortgage and increases eligibility. Once the guaranty is used on a mortgage, it is attached to that mortgage and no longer attached solely to the veteran.
Keeping a Joint Mortgage in Divorce
After a divorce, few ex-spouses will elect to keep a mortgage. Many will sell the property they jointly own, splitting equity or debt. Others will determine sole ownership but refinance the loan to a single borrower. In some cases, though, neither borrower
will be able to secure a loan independently. In this case, unless the home is sold, the initial mortgage remains. The veteran will not be eligible for a new VA home loan while this mortgage is still active even if he or she does not live in the home.
Terminating a Joint Mortgage in Divorce
Two ex-spouses may decide to terminate a joint mortgage upon divorce. Again, this is possible only if one individual can continue to afford the home without the other. The loan can be refinanced to a lower monthly payment. If the veteran is the one moving out of the home, then he or she would take the VA home guaranty off the mortgage. This means the remaining spouse would not receive the benefits of the guaranty, and the VA would be released of responsibility for the new mortgage secured on the property.
Restoring VA Home Loan Benefits
Once the VA home guaranty is no longer in place on the ex-spouse's previous home, the VA home loan benefits are restored for use by the veteran on any future loan. The veteran may reapply for a loan guaranty to determine if his or her eligibility has changed; in most cases, though, it will not have changed. The loan guaranty amount depends on the length of service and terms of discharge. If these conditions have not changed, the amount will not change. Any future VA home loan application will use the same VA guaranty. The ex-spouse will not be eligible for any further benefits.