VA Mortgage Question

[Chester32141]

Hey y'all ... my girlfriend and I are buying a house together.  She qualifies for a VA mortgage and I don't.  I can't be listed on the mortgage due to not being ex-military.  But I can be on the house which is good since we're buying it together.  There are several benefits to a VA mortgage, no PMI charge if mortgage holder is disabled, which she is, plus a slightly lower interest rate.  PMI is $115/month on an FHA mortgage.  Initially I wanted to go FHA because I wanted to be on the mortgage so that if she passed away I would not be stuck refinancing. 

My questions ... 

If we take out a VA mortgage and she dies (we're old and have to think about such stuff) ... can I just keep paying the note or would I be forced to refinance ? 

Also, am I correct in thinking that having a mortgage considerably higher than my current mortgage will actually hurt my ability to borrow money in the future? 

The house will be in both of our names ... 

[Doggy Daddy]

My wife is ex-military, but I'm not.  We're both on the V.A. mortgage.

DD

[Brad Johnson]

There's no PMI (Private Mortgage Insurance) on a VA, but there is mortgage insurance.  It's just called something else.  

Careful you and your GF don't fall into the "VA insured is always best for a veteran" trap.  The ONLY advantages to VA are zero down, higher DtoI ratios for qualification, and it allows for the seller to pay your closing expenses.  Nothing else.  No preferred rates.  No special exclusions.  Nada.  Anyone who tells you otherwise is either woefully uninformed or an out-and-out liar.  

Also be careful about interest rates.  In recent times the FHA or conventional rate was actually better than the VA rate on most days.

Again, don't go VA just because you can.  Make sure you're making a good financial decision.

As for your ability to borrow, if the mortgage isn't in your name, even partially, it should not show up on your credit report as a debt obligation.  That means it has no impact on your credit rating or ability to borrow.

Brad

[Chester32141]

Thanks Guys .... 

Doggy Daddy ... the operative word there is wife ... my GF and I have no desire to marry ... 

Brad ... there is a clause that states if a Veteran has a high enough percentage of disability (she does) then the mortgage insurance is waived in it's entirety, a savings of approximately $5000 in our case.  If she takes out the mortgage thru USAA the VA mortgage rate is .25% lower than the FHA rate.  Our closing costs will be paid by the builder if we use one of their preferred lenders. 

My concern is if my GF is the only mortgage holder on the mortgage if she dies, can I just continue to pay the mortgage ?

[Brad Johnson]

Ah, didn't realize you were able to take advantage of the disability waiver.

1. Unless you have bad credit or the DtoI exceeds your ability to buy, you CAN be on the mortgage as a co-borrower even if you weren't a vet.

2.  If you are not on the mortgage proper, the mortgage underwriter will NOT allow your name to show on the property deed.  It clouds their First Right of Refusal privilege.

3.  If something happens to your GF and both the mortgage and the house are soleley in her name, you're homeless unless she has specifically deeded the property to you as part of her will.  That, or you and she make some kind of up-front legal provisions for shared ownership of equity.

4.  If your GF dies and the mortgage is in her name only then you will have to qualify to either A) assume the current mortgage balance if there is an assumability provision in the mortgage, or B) qualify for a new mortgage.  If you are a co-borrower then the transition would be seamless.  She would be listed as a decedent and you, as the remaining mortgage holder, would become solely responsible for the remainder of the unpaid balance.

What you guys need to do is see a good estate attorney.  Pronto.

That, or get married...

Brad

[Chester32141]

Thanks Brad ... 

1. So far every broker that we've spoken to about a VA mortgage says that as long as we're not married and I'm not a vet, I can't be on a VA mortgage. 

2. Each of these three brokers has also said that I can be co-owner on the deed even if she is the only one on the mortgage whether it's VA or FHA, but I definitely see your point about clouding the first right of refusal.  Although the brokers we've spoken to have been 'old pros' they may be wrong.  They claim to have asked their underwriters when I posed this question to them. 

3. Very aware of this and would like to avoid being homeless.

4. How does one tell a good real estate attorney from a bad one ? 
    My normal attorney does not handle real estate.

Brad ... your help is greatly appreciated !!

[Brad Johnson]

You can be a co-owner on anything regardless of marital status.  The kink is the mortgage co.  I called a some local folks I trust, explained them the general situation, and their immediate response was an emphatic "NO!".  If you are not married then you cannot be on the VA loan as a non-purchasing party (only spouses).  If you are not on the loan you may not have any part in the ownership of the part of the property secured as collateral against the mortgage.

Now, what you CAN do is set it up between you and the GF that you equally share all equity in the property for whatever duration you specify.  You can also have her set up a provision in her will that the property goes to you in the case of her death.  Now understand, if she passes and the property goes to you as part of her will, you will STILL have to qualify for a new mortgage for the remainder of the principle balance.

As for real estate attorneys, get one who specializes in estate planning.  Finding a good one?  Start with word-of-mouth.  Your situation is not all that complex so it won't take much other than setting up the equity share agreement and having your GF's will amended to show you as the beneficiary in terms of the house.

Brad

[Doggy Daddy]

Doggy Daddy ... the operative word there is wife ... my GF and I have no desire to marry ... 

Oh, I caught that.  I was just trying to add some data to the pile.   

DD