When couples go through a divorce, one of the most significant financial assets they own is their home. If they have a mortgage, they may be wondering how to handle the loan during and after the divorce. For those who qualify for a V A home loan, there are specific rules and regulations to follow. This article will discuss the V A home loan and divorce and what to expect.
What is a V A Home Loan?
A V A home loan is a mortgage loan guaranteed by the U.S. Department of Veterans Affairs (V A). This loan is available to eligible veterans, active-duty service members, and surviving spouses. The V A guarantees a portion of the loan, which allows lenders to offer more favorable terms and conditions, such as no down payment or lower interest rates.
Divorce and V A Home Loan
When a couple with a V A home loan gets divorced, several things could happen. The first thing to consider is who will keep the house. If one of the spouses wants to keep the home, they will have to refinance the V A loan into their name only. This means that the other spouse’s name will be removed from the mortgage, and they will no longer be liable for the loan.
If the divorcing couple cannot agree on who will keep the house, they may have to sell the property and split the proceeds. In this case, the V A will allow the loan to be assumed by the buyer if they meet the eligibility requirements. This means that the buyer will take over the remaining balance of the loan and make payments to the V A.
V A Loan Assumption
Loan assumption is the process of transferring the responsibility for a mortgage loan from the seller to the buyer. In the case of a V A home loan, the buyer must be eligible to assume the loan. To be eligible, the buyer must be a veteran or an active-duty service member, and they must meet the V A eligibility requirements.
Assuming a V A home loan can be a good option for buyers because it allows them to take advantage of the V A loan benefits, such as no down payment or lower interest rates. However, assuming a V A loan may not be the best option for everyone, as the buyer will have to pay a funding fee to the V A, and the seller’s equity may not be available for cash-out.
Refinancing a V A Home Loan
If the divorcing couple decides to refinance the V A loan, the spouse who wants to keep the house will have to apply for a new loan in their name only. The lender will evaluate their creditworthiness and income to determine if they qualify for the loan. If approved, the new loan will pay off the existing V A loan, and the spouse will be responsible for making the new mortgage payments.
Refinancing a V A home loan can be a good option for spouses who want to keep the house, as it allows them to take advantage of the V A loan benefits and may provide them with a lower interest rate. However, refinancing also comes with costs, such as closing fees and appraisal fees, and the spouse will need to have good credit to qualify for the loan.
Conclusion
Divorce can be a stressful and emotional time, and dealing with a V A home loan can add to the complexity. It is important to understand the rules and regulations surrounding a V A home loan and divorce to make informed decisions. Whether you decide to assume the loan, refinance the loan, or sell the property, make sure to consult with a knowledgeable professional to guide you through the process.