VA Loans: What Happens If the Borrower Dies?
A reader asks, “What happens to a VA loan when the veteran dies and the spouse is not on the loan?”
The Department of Veterans Affairs official site addresses this question directly in a section called Post-Loan Frequently Asked Questions. According to the VA, this is common enough question to warrant inclusion in its FAQ:
“Q: If a veteran dies before the loan is paid off, will the VA guaranty pay off the balance of the loan?
A: No. The surviving spouse or other co-borrower must continue to make the payments. If there is no co-borrower, the loan becomes the obligation of the veteran’s estate. Mortgage life insurance is available but must be purchased from private insurance sources.”
This is similar to any other type of indebtedness the spouse may have incurred before passing away; the spouse would have to deal with unpaid credit cards, car payments, and any other debt still pending. As with any sudden life event, the death of a veteran spouse can bring financial difficulty, and in such cases there is specific advice for those obligated to repay a VA home loan.
VA.gov advises those struggling to pay a VA mortgage loan to get in touch with both the lender and the VA as quickly as possible.
“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. 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.”
“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-l000) 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.”
Borrowers in this situation would naturally be interested in learning more about how to lower monthly payments on a VA home loan. Explore 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. Speak to a lender for more details or pre-qualify online.
Do you have a question about VA home loans or VA refinancing loans? Ask us in our comments section.