VA Loans: Surviving Spouses Also Get 100% Financing, Lower Rates

Tim Lucas
Tim Lucas
The Mortgage Reports Editor
May 29, 2017 - 4 min read

Home Loan Assistance For The Surviving Military Spouse

Members of the U.S. armed forces have an advantage over the non-military home buyer or homeowner.

The VA home loan is exclusively for veterans and active-duty service members. This loan comes with low mortgage rates and requires zero downpayment.

It’s a small token of appreciation for all who have served.

But there is a benefit to this program that is often overlooked: a surviving spouse’s eligibility to purchase or refinance a home using a fallen veteran’s benefit.

So far this decade, more than 11,000 surviving spouses have used a VA home loan, according to the U.S. Department of Veterans Affairs.

There’s no advantage or benefit that can fully repay the service-connected loss of a spouse. But this program can empower survivors to move forward and start again.

VA mortgage options are widely available to surviving spouses, whether they already own a home, or want to purchase a new one.

Homeownership Advantages With VA Loans

The VA home loan was created more than 70 years ago to empower service members to buy homes and readjust to life after World War II.

More than 22 million VA home loans later, this benefit still serves those who have served, with more lenient lending guidelines than offered by any other type of mortgage.

The biggest benefit is that the eligible individual does not need a downpayment to qualify for a home purchase. And, mortgage insurance is never required. This could save the home buyer hundreds of dollars per month.

But VA loan advantages are not only for buyers. Current VA homeowners can refinance with another VA loan, often without income documentation or even an appraisal.

The VA cash-out loan is available to homeowners who want to refinance a non-VA loan into VA, or who want to tap into their home equity to raise cash for any reason. A VA cash out loan can even help the homeowner with FHA PMI removal.

The same benefits are available to eligible surviving spouses.

Home Buying For Surviving Spouses

Buying a home as a surviving spouse can be extremely challenging. A VA loan makes it much easier to qualify. Understanding a little about VA loan eligibility is a good first step.

Veterans and active duty service persons earn VA home loan eligibility by serving the following lengths of time.

  • 90 days of active duty in wartime
  • 181 days of active duty in peacetime
  • 6 years the National Guard or Reserves

Once service members earn VA loan eligibility, they are eligible to use the benefit forever.

But what if the service member passes away before he or she uses the benefit? Eligibility passes to an un-remarried spouse, in many cases.

For the surviving spouse to be eligible, the deceased serviceperson must have:

  • Died in the line of duty
  • Passed away as a result of a service-connected disability
  • Been missing in action, or a prisoner of war, for at least 90 days
  • Been a totally disabled veteran for at least 10 years prior to death, and died from any cause

Also eligible are remarried spouses who married after the age of 57, on or after December 16, 2003.

In these cases, the surviving spouse can use VA loan eligibility to buy a home with zero downpayment, just as the veteran would have.

These spouses have an additional benefit, however. They are exempt from the VA funding fee. As a result, their loan balance and monthly payment will be lower.

Also Available: Streamlined VA Mortgage Refinancing

The VA streamline refinance lowers the rate and payment on an existing VA loan faster than with a traditional refinance.

Typically, the lender will not ask for proof of current income, such as pay stubs or W2s. This can be the most important advantage for surviving spouses. Income can drop substantially when a spouse passes away.

The remaining spouse could be locked out of a traditional refinance. The household income may have fallen too much to qualify for a new loan.

But a VA streamline refinance does not inquire about income at all. According to VA, income qualification is not required, even when the mortgage holders have changed.

However, lenders may ask for re-verification of income when only one applicant remains on the VA loan. Check with a few lenders because each may have its own guidelines.

Surviving spouses are usually eligible for a VA streamline refinance when they meet the following guidelines.

  1. The surviving spouse was married to the veteran at the time of death
  2. The surviving spouse was on the original VA loan

A VA streamline refinance is typically not available when the deceased veteran was the only one of the original VA loan, even if he or she got married after buying the home.

In this case, the surviving spouse would need to qualify for a non-VA refinance, or a VA cash-out loan.

A cash-out mortgage through VA requires the spouse to meet home purchase eligibility requirements. If this is the case, the surviving spouse can tap into the home’s equity to raise cash for any purpose, or even pay off an FHA or conventional loan to eliminate mortgage insurance.

For those who are eligible, the VA streamline or VA cash-out refinance can be an ideal way to improve financial stability after the death of a spouse who has served.

VA Loan Rates Today

VA home loans come with the lowest rates of any loan type. Surviving spouses can use the savings offered by low VA rates to reduce living expenses and sustain long-term homeownership.

Get a quote for a home purchase or VA refinance. It takes only minutes to start the eligibility check and rate quote process.