Tips & Special Topics
VA Loans for Surviving Military Spouses
Added April 29, 2010
The U.S. Department of Veterans Affairs (VA) provides home loan benefits to certain surviving spouses of military personnel. Understanding these benefits can help qualified surviving spouses who qualify to finance a home with a VA loan.
First, a surviving spouse must determine whether he or she is eligible for a VA mortgage. A spouse may be eligible if he or she is:
• Un-remarried and a survivor of a military member who died while in service or from a service-connected disability
• A survivor of a service person missing in action (MIA) or a prisoner of war (POW) (Eligibility under this provision is limited to one time use.)
Although typically VA home loan benefits are for un-remarried surviving spouses, certain surviving spouses who reach the age of 57 and remarry on or after December 16, 2003 may also be eligible; however, the surviving spouse must have applied no later than December 15, 2004 to get this exception.
Next, an eligible surviving spouse must have VA loan entitlement. This is the amount the VA will guarantee for each surviving spouse’s loan. Calculating basic and bonus entitlement can get complicated if the VA home loan benefit has been used before. But, generally, full entitlement for each eligible borrower is enough to finance up to $417,000 with no money down. In certain high-cost counties the amount can be more. Of course borrowers need to qualify with credit and income before they can receive a loan of any amount.
Once eligibility and entitlement have been determined, the VA loan benefits of surviving spouses are similar to those of veterans and active duty personnel, although there are certain notable differences. Most VA-eligible borrowers are subject to a VA funding fee required by the VA home loan program. The fee can run anywhere from .5 to 3.3 percent depending on military branch and type of VA home loan. Surviving spouses are exempt from this fee.
Additionally, a surviving spouse who obtained a VA mortgage with a veteran prior to his or her death, regardless of whether the death was duty related, may obtain a VA guaranteed interest rate reduction refinance loan (IRRRL), or Streamline refinance loan. This is significant because the surviving spouse would not necessarily need to be VA-eligible to qualify for this type of VA to VA refinance loan.
Surviving spouses who are eligible for veterans’ mortgages can assume the VA loan of another VA-eligible borrower by replacing entitlement. The VA requires the following to happen for replacement on an assumed VA loan to be allowed:
1. The buyer must occupy the property and complete VA Form 26-8106
2. The buyer must have enough entitlement to replace that of the seller’s
3. The buyer and the seller must both prove eligibility
Finally, when a qualified surviving spouse repays a VA mortgage in full, he or she can have entitlement restored and use the Program again. Restoration of entitlement is not automatic. The borrower must complete VA Form 26-1880 to let the Department of Veterans Affairs know that he or she wishes to restore entitlement. Proof of payment in full and in some cases disposal of property are needed before restoration of entitlement is given.
For more information on surviving spouse VA loan benefits contact a VA Home Loan Professional.
