VA Loan Borrower Scenarios

Who can actually get a VA loan in Texas? Well, there are several scenarios to consider. For the sake of simplicity, I will use the term “veteran” to encompass both active-duty service members who are eligible for a VA loan as well as those who are out of the service and eligible. This information only applies to VA loans in Texas, as I do not originate VA loans outside of Texas.

Scenario #1: ?An Unmarried Veteran

An unmarried veteran can of course get a VA loan on their own, assuming they qualify for the loan and can occupy the property within 60 days of closing. That is the simplest scenario.

Scenario #2: ?A Married Veteran & Non-Veteran Spouse

If you are married, your spouse can be on the VA loan with you, or you can leave them off the loan if their income is not needed to qualify for the loan or their credit score is under the minimum needed to be on the loan with you. Here are the two options when you are purchasing a home with your spouse in a community property state like Texas:

1. Including your spouse on the VA loan:

• Both of you must be on the loan application.
• Both incomes can be used to qualify for the loan.
• Both of you?must meet the lender’s minimum credit score requirement.
• The lower of the two mid-scores determines pricing on the loan.

2. Excluding your spouse from?the VA loan:

• Both of you must be on the loan application.
• Your spouse is?classified as a "Non-Purchasing Spouse."
• Their income and credit scores are NOT factored into the application.
• Your mid-score is the only one used to determine pricing on the loan.
• Their?debts are included in your debt-to-income (DTI) ratio.
• There are some circumstances in which your spouse's qualifying income, which is not being used, may be used to offset their individual debts.

What if you are married, but currently separated? Since Texas is a community property state and does not recognize a legal separation, we can only process your VA loan as “married” or “unmarried”. If you are separated when you apply, we either need to wait until your divorce is completed and you have a copy of your final divorce decree or we need to proceed with your spouse as part of the transaction, debts included. If you have filed for divorce, then we need to wait until you have a final divorce decree before proceeding. (This is only on VA. You could go Conventional on your own prior to the divorce being filed.)

Scenario #3:? Two Veterans Married to Each Other

This is very similar to the previous example; however, in this case, each of you is either an active-duty service member or a veteran. Again, we can make one of you a Non-Purchasing Spouse, but that is only possible if we are using the VA entitlement from only one of you.

If you do not have enough VA entitlement by yourself to purchase the subject property, then by having you both on the loan, we can use some VA entitlement from each of you to make it a no down payment VA loan. This is known as “Dual Entitlement”.

Unfortunately, you cannot use dual entitlement to double the VA loan limit. Full VA entitlement is currently $2,000,000. If you both have full VA entitlement available, you are still capped at $2,000,000, not $4,000,000. However, if either of you has partial VA entitlement, then you will be limited to the county loan limit which is currently $806,500 in Texas for 2025.

Scenario #4:? Two Unmarried Veterans Buying Together

Assuming each of you has VA entitlement available, then two unmarried veterans can purchase a home together with no down payment using the VA home program, assuming you will both live in the home as your primary residence. How much entitlement is used from each of you depends on the situation. In most cases, the VA funding fee is also calculated differently by adding together the funding fee for each borrower and dividing the result by two. So, if your VA funding fee is 3.30%, but the other veteran buying with you is exempt, you would have a VA funding fee of 1.65%. (See more on the VA funding fee in my April 2024 newsletter.)?

Scenario #5:? A Veteran & Friend Buying Together

This one surprises a lot of people. A veteran and someone they are not married to who is not a veteran, can get a VA loan together. Just as with any VA loan, all parties must occupy the property as their primary residence for the first 12 months. For instance, a veteran and their son or daughter, or mother, or father, or even just a friend with no familial relationship with you, could get a VA loan with you, assuming they are at least 18 years of age.

There is a catch in this scenario. Since you are using your VA loan with someone who is not your spouse and since they are not a veteran, the VA will not guarantee the loan to the lender at the usual 25% guarantee. Instead, it is only guaranteed at 12.5%. You and/or your co-borrower will be required to make a minimum down payment of 12.5% of the home price. Sometimes the required minimum down payment is actually more than 12.5% and your lender can help you determine that amount.

These loans also require “prior loan approval” from the VA. That means that prior to the lender issuing a Clear-to-Close, the lender will need to send the full loan package to the VA for the VA to review and give their “prior approval”. This requirement can easily add two weeks to the loan process, so we do not recommend closing dates under 45 days when the buyers are in this situation.

Scenario #6:? An Unmarried Surviving Spouse of a Veteran

This situation does present some unique considerations for planning around VA loan benefits. As a military veteran, your VA loan benefit has allowed you to secure favorable terms for your home purchase. However, if you were to pass away, your spouse would face certain limitations regarding VA loan eligibility.

For instance, I am a military veteran, but if I were to pass away, my wife would not have any VA loan benefit, even as my surviving spouse. She could remain in our home and continue to make payments on the VA loan that we currently have on our house, but she could not move somewhere else and use the VA home loan again as she would not be eligible.?This is because not all surviving spouses are eligible for VA loans.

For the unmarried surviving spouse of a veteran to be eligible for a VA loan, it will depend on the cause of death of the veteran. Any one of these causes of death would very likely make the unmarried surviving spouse eligible for a VA loan:

• Veteran was missing or killed in action
• Veteran died while in military service
• Veteran died due to a service-connected disability
• Veteran was totally disabled at the time of death

One of the indicators of an unmarried surviving spouse being eligible for a VA loan is if they are receiving Dependency and Indemnity Compensation (DIC) payments from the VA, but this is not a requirement.

Most of the time, the unmarried surviving spouse will be 100% exempt from property taxes in Texas in the home they currently own. However, when they apply for pre-approval to purchase another property with a VA loan, they need to qualify with full property taxes until they close on their new home and get confirmation from the county tax office on how much their exemption will be on the new property. The reduced property taxes will be limited to the amount of tax they were exempt from on their current home.?They are not automatically 100% exempt on the new home.

In Summary…

There are many different scenarios where a VA loan can be used by one person or multiple people. If you are married, your spouse can be a Non-Purchasing Spouse (NPS) if you don’t need their income to qualify. If you are both veterans and married to each other, we can use the VA entitlement for just one of you or for both. If two veterans are not married, we’ll need entitlement for each of them to be able to do it without a down payment. A veteran and non-spouse can get a VA loan together, as long as they both owner-occupy the property and they make a minimum down payment of approximately 12.5%. Give at least 45 days for closing in those situations. Additionally, unmarried surviving spouses of certain veterans may also be eligible for VA loans, provided they meet specific eligibility criteria.

Got questions about VA loans?

Great, just email?[email protected]?or call/text 512-357-7762.

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Legal Disclosures: Veterans United Home Loans is a VA-approved lender, not affiliated or endorsed by any government agency, including the VA. Chad Bowman, Austin Branch Manager, NMLS 191475. Company NMLS 1907. Equal Opportunity Lender. More info. at ChadBowman.com.