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How Divorce Affects Your VA Loan

We'll look at two common scenarios below: what happens to a current VA loan after divorce and getting a new VA loan after divorce.

Published on October 21, 2020

Many couples deal with the realities of divorce every day. Unfortunately, divorce can take a toll on finances and potentially affect your VA loan eligibility.

We'll look at two common scenarios below: what happens to a current VA loan after divorce and getting a new VA loan after divorce.

What Happens To A VA Loan After Divorce?

During a divorce, you must agree on how to split belongings, debts and, if applicable, the home.

Depending on state law and the mortgage contract, a non-military spouse may be awarded the home and be responsible for making the mortgage payments.

Options For The Home

There are different options to consider when you have a VA home loan and are getting divorced and trying to decide what to do with the house:

  • Agree on who gets the house and if the individual that keeps the home can afford the mortgage payments.
  • Sell the house and divide any acquired equity in whatever way you agree.
  • Refinance the home to remove the spouse or yourself from the mortgage.

Since divorce proceedings can take a long time, it may be difficult to continue making the mortgage payments every month.

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Keep Making Payments

Being agreeable during a divorce may be difficult. However, it's crucial to continue paying your mortgage and other debt obligations.

Failing to pay your current VA loan will result in both party's credit taking a hit. Beyond this, if the mortgage goes into default or foreclosure, it could keep you from obtaining a new mortgage for years to come.

If you are unable to come to an agreement or can't make mortgage payments, reach out to your lender as soon as possible. They may be willing to work with you to set up a temporary forbearance or payment relief.

Getting A VA Loan After Divorce

It's entirely possible to get a VA loan after divorce. The primary considerations are credit, income and your VA entitlement.

Credit After Divorce

If you failed to make payments on debts during the divorce, it's possible your credit took a hit.

In the current lending climate, VA lenders often look for a 620 credit score. If your credit falls below this threshold, it's still may be possible to get a VA loan; let VAMortgageCenter connect you with a home loan specialist to determine your eligibility.

Income After Divorce

VA lenders require a satisfactory debt-to-income ratio and that borrowers have income left over after debts - known as residual income.

Alimony or loss of income can negatively affect your DTI and ability to hit the residual income requirement.

That doesn't mean you won't qualify but may mean you'll need to downsize the purchase amount.

VA Loan Entitlement After Divorce

Entitlement is the trickiest part of a divorce. If the non-military spouse receives the home and doesn't refinance or sell, your VA entitlement will be wrapped up in the home until the loan is refinanced or paid in full.

Buying a home after a divorce is challenging but not impossible. To check your eligibility for a VA loan after a divorce, let VAMortgageCenter connect you with a home loan specialist today.