A Spouse’s Guide to VA Loan Eligibility and Requirements

The VA home loan is a powerful tool designed to help our nation’s heroes and their families achieve the dream of homeownership. While the benefit is earned through the service of a Veteran or active-duty service member, it is often a joint effort to get a loan, purchase a home, and build a life together. This means that a spouse plays a critical role in the VA loan process.

At VeteransLoans.com, we understand that there are many questions surrounding a spouse’s involvement in a VA loan, from eligibility to financial responsibilities. This comprehensive guide will demystify the requirements for spouses, including the unique situations of non-borrowing spouses, community property states, and surviving spouses, ensuring you and your family are fully prepared to take on the VA home loan process with confidence.

Who is Eligible for a VA Loan?

First and foremost, it’s important to clarify that the VA home loan benefit belongs to the Veteran or service member who has met the VA’s service requirements. A civilian spouse is not independently eligible for a VA loan unless they are also a Veteran themselves.

However, a spouse’s involvement in the loan process can take several forms:

• Spouse as a Co-Borrower: This is the most common scenario. The Veteran and their spouse apply for the loan together. This allows the lender to consider both incomes, potentially increasing the family’s borrowing power.
• Spouse as a Non-Borrowing Spouse: The Veteran applies for the loan alone, but their spouse’s financial situation may still be a factor, especially in certain states.
• Spouse as a Surviving Spouse: A surviving spouse of a Veteran who died in service or from a service-connected disability may be eligible for the VA loan benefit in their own right.

When a Spouse is a Co-Borrower: What You Need to Know

When a Veteran and their spouse decide to apply for a VA loan together, the lender will underwrite the loan based on the combined financial picture of both individuals. This means the spouse’s credit history, income, and debts are all considered.

1. Credit Requirements

While the VA does not set a minimum credit score, most lenders have their own requirements. A typical VA lender will look for a minimum FICO score of around 620.

• Joint Credit: When you apply with your spouse, the lender will review the credit report for both of you. Lenders typically base the loan’s interest rate on the lowest credit score of the two borrowers. This means that even if the Veteran has excellent credit, a low score from their spouse could lead to a higher interest rate or, in some cases, make it difficult to qualify at all.
• Addressing Credit Issues: If your spouse has a credit score below the lender’s minimum, it may be necessary to either work to improve their score before applying or to have the Veteran apply as the sole borrower.

For more information on credit scores and the VA loan, you can read our detailed article on the subject.

2. Income and Debt Considerations

When a spouse is a co-borrower, their financial information is fully integrated into the loan application.

• Income: The lender will consider all stable, reliable, and consistent income from both the Veteran and the spouse. This includes income from employment, pensions, or other sources. Including the spouse’s income is often a great strategy for increasing the family’s residual income and debt-to-income (DTI) ratio, allowing them to qualify for a larger loan.
• Debt-to-Income (DTI) Ratio: The lender will calculate a combined DTI ratio based on the total monthly debt payments of both the Veteran and the spouse, divided by their combined gross monthly income. The VA typically prefers a DTI ratio below 41%, but this can be flexible depending on the applicant’s residual income and other compensating factors.

3. Occupancy Requirements

The VA loan is intended for a primary residence. When a Veteran and their spouse are co-borrowers, one of them must certify their intent to personally occupy the home. The VA allows a spouse to satisfy this requirement on behalf of the Veteran if the Veteran is deployed or has long-distance employment.

The Non-Borrowing Spouse and Community Property States

In most cases, a Veteran can apply for a VA loan as a single applicant, even if they are married. However, this becomes more complicated in community property states.

What are Community Property States?

In community property states, most assets and debts acquired by either spouse during the marriage are considered jointly owned by both spouses. The community property states are:

• Arizona
• California
• Idaho
• Louisiana
• Nevada
• New Mexico
• Texas
• Washington
• Wisconsin

How a Non-Borrowing Spouse Affects the Loan

If you are a Veteran in a community property state and want to apply for a VA loan without your spouse as a co-borrower, your lender is legally required to factor in your spouse’s debts.

• Debt Counted, Income Ignored: In a non-borrowing spouse situation in a community property state, the lender will count the non-borrowing spouse’s debts when calculating your DTI ratio, but they cannot count their income.
• Impact on Qualification: This can make it significantly more challenging to qualify for a VA loan. If your spouse has a high amount of debt, it could push your DTI ratio over the lender’s threshold, even if your personal finances are strong.
• The Solution: The best way to navigate this situation is often to add the spouse as a co-borrower and use their income to offset their debt. If that isn’t possible, you may need to reduce the amount of the loan you’re applying for or pay down some of your spouse’s debt before applying.

You can learn more about this complex issue on our blog post about VA loans in community property states.

The Surviving Spouse: An Earned Benefit

The VA loan is not just for Veterans and active-duty service members. Under specific circumstances, a surviving spouse can use the VA loan benefit to purchase a home. This is a vital program that provides housing stability for military families after the loss of a loved one.

Eligibility Requirements for a Surviving Spouse

You may be eligible for a VA loan as a surviving spouse if you meet one of the following criteria:

• Your spouse died in service or from a service-connected disability and you have not remarried.
• Your spouse died while in service or from a service-connected disability, and you remarried on or after December 16, 2003, and on or after your 57th birthday.
• Your spouse was a Veteran who was totally disabled from a service-connected disability, and they passed away, even if the disability was not the direct cause of death. You must be receiving Dependency and Indemnity Compensation (DIC) from the VA.
• Your spouse is a service member who is listed as missing in action (MIA) or a prisoner of war (POW).

Key Benefits for Surviving Spouses

• No Down Payment: Like Veterans, eligible surviving spouses can purchase a home with no down payment.
• Exemption from the VA Funding Fee: This is a major benefit. The VA funding fee is waived for surviving spouses, which can save thousands of dollars at closing.
• Reusable Benefit: Surviving spouses who qualify for the benefit can use it multiple times throughout their lifetime.

To prove eligibility, a surviving spouse must obtain a Certificate of Eligibility (COE) from the VA. Your lender can help you with this process, but you may need to provide additional documentation such as the Veteran’s DD Form 214, your marriage license, and the Veteran’s death certificate.

The Case of a Non-Spouse Co-Borrower

While a Veteran can apply for a VA loan with a spouse, applying with an unmarried partner or another non-Veteran co-borrower is more complicated.

• Joint VA Loan: In this scenario, the loan is considered a “joint loan.” The VA only guarantees the Veteran’s portion of the loan. This can lead to a required down payment on the non-Veteran’s portion of the loan, a key difference from a standard VA loan.
• Not All Lenders: Many VA lenders do not offer joint VA loans with non-spouse co-borrowers, so it’s important to work with a lender that has experience with this specific situation.

The Bottom Line: Communication and Preparation are Key

The VA loan is a family benefit, and a spouse’s involvement can have a significant impact on the loan process. The most important takeaways are:

• Open Communication: Be open and honest with your loan officer about your financial situation, including any debts your spouse may have, especially if you live in a community property state.
• Plan Together: Before you apply, review your finances as a couple, including credit scores, income, and debt. Address any issues upfront to ensure a smooth application process.
• Leverage the Right Expertise: VA loans have specific rules and nuances that differ from conventional mortgages. Work with a lender who specializes in VA loans and understands the complexities of all these scenarios.

At VeteransLoans.com, we have a team of dedicated VA loan specialists who are experienced in working with Veterans and their spouses. We can help you navigate all aspects of the loan process, from determining eligibility to understanding the impact of your spouse’s finances.

Ready to take the next step toward homeownership with your family?

• Get Pre-Qualified: The first step is to get pre-qualified and see how your combined finances can work for you. Visit veteransloans.com/prequalify today.
• Speak with a Specialist: For a personalized consultation about your specific situation, including questions about non-borrowing spouses or community property states, call us at 1 (888) 232-1428.

Your service has earned you this benefit, and we are here to help you and your family use it to its fullest potential.