Are you searching for a mortgage? If you are married and a veteran, you are in luck, because there are special loan guidelines through the VA for married service members. According to FHA rules, traditional loans may require anywhere from a 3% – 20% down payment, and an FHA loan would require a 3.5% down payment from both active and former members of the U.S. military.
Armed Forces have another option: the VA loan
The VA loan is a government-backed, low-interest option. This alternative provides 100% financing to any service members and also provides a zero-down payment option to the spouses of service members provided they are involved in the transaction.
Certificate of Eligibility (COE)
To be applicable for a VA Mortgage Loan, one must have a Certificate of Eligibility (COE). A COE may be acquired through benefits by visiting benefits.va.gov. However, of the nearly 4/5 active or inactive service members who are married to a spouse in the Army, Navy, Air Force, Marines, or Coast Guard, many marry outside of the Armed Forces. The VA addressed this by allowing for the partner of the COE holder to also be eligible so long as the two are legally married. Additionally, any dependents of the service member also gain eligibility by association, and the COE transfers to survivor spouses of deceased service members. The VA also took into consideration the fact that military transfers might affect loan transactions amongst current service members.
Lenders take into account two things in this situation. The first can be confirmed by the U.S. Armed Forces, which is that the income of one spouse will not change. However, the second consideration for a lender is that the “trailing spouse” of the service member be able to find employment in the new location as well. This can, therefore, be something that affects an active duty member attempting to sign a mortgage, especially because the spouse must have been employed in that line of work for at least two years for it to be considered a reliable source of future income. According to the U.S. Department of Veterans Affairs, the loans are provided by private lenders. It may be furnished by the lender of your choice. Because a portion of the loan is guaranteed by the VA, the lender can provide the COE holder with more favorable loan terms. Thus, members and their spouses can get a more competitive interest rate.
Additionally, once a VA Mortgage loan has been taken out, one can apply for an Interest Rate Reduction Refinance Loan (IRRRL) to further lower interest rates. The IRRRL can only be used if the mortgage is a pre-existing VA loan, and not on other conventional or FHA loans.
What if the spouse’s credit score is low
While there is no minimum credit score required to take out a VA Mortgage Loan, lenders usually look for a score between 550 and 620. Almost all mortgage loans are used with the credit score of the spouse with lower credit, but the VA loan allows the veteran’s middle credit score to be used even if the other spouse’s is less impressive by applying only in the name of the COE holder.
Community property states
Some states are called community property states. In Wisconsin, Arizona, California, Idaho, Louisiana, Texas, Washington, New Mexico, and Nevada lenders consider applications for mortgage loans a bit differently than in other states. Properties acquired by married couples in community property states are considered joint assets, meaning that any outstanding liabilities on one spouse may be considered for both parties. In this case, a conventional loan may be more appropriate.
Veterans United recommends using a realtor who is familiar with the details of the VA loan so that they can structure the contract accordingly when putting down an offer for a home. Veterans United Realty is one such organization providing specialized services to veterans and their spouses.
To get a quote for the loan, you do not need to provide your Social Security number and the process is entirely without obligation. It can be a great way to secure a zero-down, low-interest loan for an active or inactive service member, their spouse, or their dependents. Happy hunting!
Eric Lawrence Frazier, MBA
President and CEO
NMLS 461807 CAL BRE 01143484