VA Streamlines After a Death, Divorce, Marriage
by Ron Bennett, VA loan officer and 35-year US Army Veteran (NMLS 57792)
While writing this blog, I received a call from a family member that my cousin wanted to look into a VA streamline refinance, or IRRRL, to make the payments more manageable. My cousin and her deceased husband had originally purchased a home with a VA loan.
My cousin was on the deed and on the loan. Her husband, who was the eligible veteran, would need to be removed with the refinance, since he has now passed away.
As sad as the situation was, we had to look at the options. While the situation appeared difficult at first, adding or removing someone from a VA loan can be done.
Since the eligible veteran has passed away, we had to look at VA streamline refinance guidelines in this case.
There are many rules to be aware of when it comes to any borrowers changing when doing a VA streamline refinance. Some examples are when a Veteran gets married, divorced, re-married, or another kind of co-borrower changes between the time the home was purchased and the time of the refinance.
The general rule of thumb is that the eligible Veteran must remain on the loan. It’s the entitlement of the Veteran that makes the VA loan possible.
Fortunately, there is an exception for when the deceased Veteran and spouse purchased the home as joint borrowers. In this case, an IRRRL may be possible even though it’s only the Veteran’s spouse on the loan.
When Borrowers have Changed since the Home Purchase
Here’s what the VA lending handbook says about VA streamlines when the Veteran gets married, divorced, passes away, or changes co-borrowers:
- Can an unmarried Veteran add a spouse with an IRRRL? Yes.
- Can the divorced Veteran remove a former spouse with an IRRRL? Yes.
- Can a divorced and re-married Veteran remove the former spouse and add the new spouse with an IRRRL? Yes.
- Can an eligible Veteran refinance into their own name with an IRRRL, substituting their entitlement, even though another Veteran originally purchased the home? Yes.
- Can a spouse who originally purchased the home with a Veteran use an IRRRL to refinance if the Veteran dies? Yes, as in the case of my cousin.
- Can a Veteran remove a non-spouse with whom he or she originally purchased the house using an IRRRL? Yes.
- Can a divorced spouse of the eligible Veteran use an IRRRL to refinance? No.
- Can the spouse of a Veteran refinance with an IRRRL if they were married after the home purchase and then the Veteran died? No.
- Can the spouse of a Veteran refinance with an IRRRL if they were not on the original VA loan, and the Veteran died? No.
- Can the new spouse of a Veteran refinance using an IRRRL if he or she was not on the original loan and the Veteran died? No.
- Can a non-Veteran refinance using an IRRRL if he or she originally purchased the home with a Veteran, but the eligible Veteran is now deceased or otherwise not going to be on the loan? No.
As you can see with these examples, the majority of the time, the eligible Veteran must remain on the loan. After all, without their entitlement, there can be no VA loan.
Also keep in mind that the VA lender may require some income documentation when a borrower is removed, such as in the case of divorce or death. This is because the lender may want to make sure that the remaining borrower can still make the payments, since the former borrower’s income has stopped.
Going back to the example of my cousin, she can get her deceased husband removed from the loan and hopefully reduce her payments.
There are a lot of things that can happen in life. And the ins and outs of VA home loans can be difficult to understand. It is my hope this information will help you understand what a VA streamline refinance loan is, the situation in which it is used and how it can apply to you and your relationship status.
I would love to assist you with your VA loan needs when you are ready. Be sure to ask me about your situation and what we are going to require helping you. If you have any further questions, please contact my office.
Ron Bennett (NMLS 57792, MLO-57792) is a Sr. Mortgage Advisor in Washington State. Contact Ron at 253.561.9704 and visit him on Facebook. Ron’s military experience: last rank – Master/First Sergeant (E-8); 35 years of service; U.S. Army.