What Happens to a VA Loan if the Borrower Dies?
"What happens to a VA loan when the veteran dies and the spouse is not on the loan?"
VA borrowers might assume that if they die, the VA loan guaranty would pay off the remaining balance of the VA mortgage, but this is not true. According to the VA official site, the surviving spouse, where applicable, would assume the debt. In cases where the borrower dies but has no co-borrower or surviving spouse, the veteran's estate would be responsible for the VA guaranteed mortgage.
This is similar to any other type of indebtedness the deceased may have incurred before passing away; in such cases, the surviving spouse would be responsible, in accordance with state and federal laws, for any unpaid credit cards, car payments, other debts still pending.
The death of a spouse can bring financial difficulty, and when it comes to a surviving spouse trying to manage the estate of a loved one, plus the unpaid bills and VA home loan, the Department of Veterans Affairs does have refinancing loan options.
In situations where there may be missed VA mortgage payments, the threat of VA loan default or even foreclosure, the Department of Veterans Affairs urges surviving spouses to take quick action.
"It is best to talk with the lender as soon as possible to explain why the payments are late and when and how those late payments will be made."
That according to VA.gov, which also adds some general advice to those experiencing financial difficulties. "If there was a job loss, divorce, or other serious problem, and the regular monthly payments cannot be made, then it may be best to sell the home to avoid foreclosure."
But selling the home is just one option. The VA official site states, "VA may be able to assist in arranging a repayment plan or other alternative to foreclosure. VA offers home loan counseling through its 9 Regional Loan Centers (RLCs). Call our toll-free number (800-827-1000) to request a call-back from a Loan Service Representative or click here for the phone number and address of the RLC closest to you."
Whether facing major life-altering circumstances or not, It's always best to stay informed about your options for refinancing a VA mortgage, including the VA Streamline Refinancing Mortgage or Interest Rate Reduction Refinancing loan (IRRRL), which can lower monthly payments, interest rates, or both. In some cases the borrower may qualify for a no-credit check IRRRL. You can pre-qualify online to get an idea of what type of refinancing you could be eligible for, and what further steps may be required to begin.
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