Direct VA Loans

Surviving Military Spouse VA Loan Benefits

The U.S. Department of Veterans Affairs (VA) provides home loan benefits to certain surviving spouses of military personnel. Understanding the benefits of VA loans can help many qualified surviving spouses finance a home.

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 generally not remarried and:

  • A survivor of a military member who died while in service or from a service-connected disability, or

  • A survivor of a veteran rated continuously totally disabled for 10 years immediately before death (1 year for POW who died after 9/30/99), or 5 years after discharge date, and was eligible for VA DIC at the time of death by any cause, or

  • A survivor of a service person MIA or a 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 for eligibility no later than December 15, 2004 to get this exception.

Surviving Spouses and VA Loan Entitlement

To get a VA loan, an eligible surviving spouse must have entitlement available. 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.

Surviving Spouse Exemption from VA Funding Fee

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 the VA funding fee.

Ineligible Surviving Spouses and VA Streamline Refinancing

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 VA Streamline Refinancing. This is significant because the surviving spouse would not necessarily need to be eligible for VA loans 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.

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