Military couples are becoming more and more common. So, how should you approach maximizing your VA loan entitlement if both you and your spouse are eligible?
First, spouses who are both eligible for a VA loan may buy a home together, but the loan's guarantee amount is the same as if just one partner were eligible: The entitlement (or dollar amount the VA pledged to repay if the buyer defaults) may not exceed the lesser of 40% of the loan amount or $36,000, and up to $105,250 for certain loans in certain areas. This works out to one quarter of the purchase price. In other words, you aren't able to double your amount because there are two of you. That doesn't mean there aren't still some choices you can make to maximize your dual eligibility:
1. COMBINING LOANS
One option for married military couples looking to buy for a second time is to combine the remaining entitlement of one spouse from a previous VA loan with the rest of the entitlement coming from the second spouse. However, to do this both spouses must have satisfactory credit--one cannot compensate for the other. But, if you both meet the credit and underwriting requirements, this is a great way to fully maximize your entitlement for a second purchase.
One caveat with this approach is that, per occupancy rules, both husband and wife must reside at the property together. They cannot buy two homes at once.
2. USING ONE ENTITLEMENT FULLY
This is the most likely approach, involving just one spouse's entitlement. The second spouse can save their entitlement for future use--like when it's time for a bigger home, for example, and the couple would like to keep their first house as a rental property.
3. SPLIT ENTITLEMENT
This allows couples to split their entitlement evenly for a joint VA loan, and to be done without prior approval from the VA. This makes each financially responsible for half the mortgage and builds credit for both parties.
WHAT IF WE DIVORCE?
While none of us want to prepare for the worst, should you and your spouse divorce after purchasing a home with your VA eligibility, and the spouse is awarded the home, you may not have your entitlement restored unless the ex-spouse refinances the property and/or pays off the VA loan. In the case of both spouses being VA eligible, the ex-spouse awarded the home can also substitute his/her entitlement which would restore yours.
If you have more questions on maximizing the eligibility of married military couples when applying for a VA loan, give one of our VA experienced mortgage officers at Patriot Home Mortgage-Pacific Group a call today, and we will be happy to work with you!