Can the Child of a Veteran Get a VA Loan?

VA loans are an excellent way for eligible veterans to become homeowners. Backed by the Department of Veteran Affairs, these loans offer favorable terms to help veterans and active-duty service members buy their homes, such as no down payment and low interest rates.

What about the children of veterans, though? Can a VA loan be transferred to a child? Or perhaps, can a child of a deceased veteran get a VA loan? While VA loans are primarily designed for veterans themselves, there are some circumstances where a child of a veteran may be able to make use of this program. Let’s look at the possibilities.

Direct Eligibility

Generally speaking, children of veterans are not directly eligible for VA loans.

The VA loan benefit is specifically for veterans, active-duty service members, eligible surviving spouses, and some members of the National Guard and Reserves. However, there are a few scenarios in which a child of a veteran may be able to benefit from a VA loan indirectly.

Assuming an Existing VA Loan

One way a child of a veteran could potentially access a VA loan is by assuming an existing one.

Loan assumption is a process where a new borrower takes over the original borrower’s existing mortgage. In the context of VA loans, the child would take on the responsibility for the remaining balance of their parent’s loan under the same terms and conditions. There are several scenarios where this might occur.

VA loan assumption when the veteran passes away

The most common situation is when a veteran parent passes away and leaves their property to their child.

VA loan assumption while the veteran is alive

Another scenario is when a veteran parent wants to sell their home to their child, perhaps to keep the property in the family or help their child enter the housing market.

VA Loan Considerations

The key advantage of loan assumption is that the child may benefit from the favorable terms of the VA loan, which often include lower interest rates and no down payment requirements. This can be particularly helpful if current market rates are higher than the rate on the existing VA loan. However, this is not always possible.

Not all VA loans are assumable

First, not all VA loans are assumable and the VA must approve the assumption.

Credit and income requirements

To assume a VA loan, the child must meet the credit and income requirements set by the lender and the VA. They will also need to demonstrate their ability to make the mortgage payments.

Veteran’s entitlement

When a non-veteran assumes a VA loan, it doesn’t free up the veteran’s entitlement, which remains tied to the loan until it’s paid off. This means the veteran may not be able to use their VA loan benefit for another property until the assumed loan is fully repaid.

Paperwork and fees

The assumption process involves paperwork and usually involves fees, such as a processing fee, funding fee, and other closing costs.

Compensate for equity

If the original loan had a down payment, the child assuming the loan may need to compensate the veteran for their equity in the home. If the veteran had already paid part of the home equity, the child will need to compensate the parent for the equity already built in the home.

Joint VA Loans

Another possibility is a joint VA loan between the veteran parent and their child.

In this scenario, the veteran uses their VA loan entitlement, the child is added as a co-borrower, and both parties are responsible for the mortgage. This arrangement can be helpful if the child needs help qualifying for a mortgage or if both parties plan to live in the home.

Considerations and Limitations of a Joint VA Loan

The veteran must meet all VA loan eligibility criteria to apply for a VA loan.

Also, a VA loan requires the veteran to occupy the home as their primary residence for a certain period. This means that they will have to live with their child for that time.

Finally, using a VA loan for a child, even in a joint arrangement, will use up some or all of the veteran’s entitlement. If the veteran parent wants to buy another property, their entitlement won’t be available to them.

Alternative Options for Children of Veterans

If a child of a veteran doesn’t qualify for the above scenarios, there are other government-backed loan programs they might consider. For example, FHA loans offer low down payments and flexible credit requirements. Additionally, USDA loans are available for rural and some suburban properties with no down payment.

Finally, some states offer benefits to children of veterans through state-specific veteran programs.

When a Veteran’s Child Can Get a VA Loan

While children of veterans aren’t typically eligible for VA loans on their own, there are some circumstances in which they may be able to benefit from this program, such as through loan assumption or a joint application with their veteran parent.

If you’re a child of a veteran exploring your home-buying options, be sure to research thoroughly. Contact Society Mortgage to explore your possibilities and find out how you can achieve your dream of homeownership in the most favorable terms.

The path to homeownership may not be as straightforward as it is for veterans themselves, but with professional advice from our Society Mortgage Loan Officers, you may be able to use some of the benefits associated with VA loans. Contact us today, and one of our Loan Officers will be happy to give you a complete overview of your options!