Divorce And Your VA Loan -Now What

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Presentation Description

"Mortgage Originator Jimmy Vercellino, specializing in VA loans, helps veterans use their VA loan benefit to their greatest advantage. For more details call us at 480-351-5904 or visit our site http://sandiego.valoansforvets.com/ First Choice Loan Services Inc., DBA FCLS in CA 959 South Coast Drive, #490 Costa Mesa, CA 92626"

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Presentation Transcript

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VA loan entitlement is a benefit offered to eligible military members and surviving spouses. Military spouses are included in this benefit by association.

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This distinction is important because it affects what happens to a VA mortgage in the case of divorce.

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In a divorce the non-military spouse loses VA loan rights.

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When a VA mortgage is processed the guaranty remains with the loan even if the veteran stops living in the home.

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The only way to remove the VA guaranty is refinancing the loan into a conventional mortgage or selling the home so the veteran can become eligible for a new VA loan.

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Jointly held mortgages are a bit different. In this case only one spouse needs to qualify for the VA loan and the guaranty is no longer attached only to the veteran borrower.

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This can introduce complications. If neither spouse can qualify for a new mortgage and the loan is not paid off by selling the home…

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…the veteran will be unable to take out a new VA loan while the original loan exists.

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WHAT HAPPENS TO THE VA LOAN IN DIVORCE

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Couples who own a home together with a VA loan have several options in a divorce.

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One solution is selling the property and dividing any equity or debt between the spouses.

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This option frees both spouses from the mortgage and allows the veteran to become eligible for a new VA loan.

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Sole ownership of the home can also be designated to one spouse who can then refinance the mortgage into their name alone.

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This option also frees the veteran from the loan guaranty. This solution is most common when its the non-military spouse who will remain in the home.

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A release of liability for credit and legal purposes can be requested from the VA instead.

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In this case the request is processed by the VA when the veteran and spouse are both co-borrowers but the co-borrower wants to be released from the loan.

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To be approved for a release of liability the divorce must be final. The entire estate must remain in the former spouses name.

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A loan assumption or transfer may be used as well. In this case the mortgage is assumed by the purchaser as-is with the remaining balance and loan term.

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The veteran does not need lender or VA approval to do a loan assumption. A major downside to this option is the veteran is still liable for the loan if the purchaser defaults on payments.

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Rather than using a loan assumption with a non-qualifying borrower a better solution when possible is a substitution of entitlement.

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This is another type of loan assumption in which the new buyer has their own VA loan entitlement which is substituted for the current VA borrowers.

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The veteran spouse will be free to use their VA entitlement to secure a new loan.

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This option does require that the purchaser have an entitlement sufficient to substitute for the ex-spouses VA entitlement. The home also must be occupied by one of them.

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In a worst-case scenario neither spouse can get a new loan after the divorce and the home is occupied by either spouse.

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In this case the veteran cant get a new VA mortgage until the original loan is paid off through refinancing a loan assumption or sale of the home.

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Mortgage Originator Jimmy Vercellino specializing in VA loans helps veterans use their VA loan benefit to their greatest advantage.

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For more details call 619-350-1951. Visit the site at

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First Choice Loan Services Inc. DBA FCLS in CA 959 South Coast Drive 490Costa Mesa CA 92626 Phone: 619-350-1951

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