Don’t ask, don’t tell: The mortgage edition
Especially in light of today being Veterans Day, I thought I’d shed light on an important issue regarding vets. I recently discussed on The Takeaway how veterans are facing hurdles when returning to the workforce. Now, another issue has come to my attention: Gay veterans don’t have full access to the special home loan program available to most veterans.
For home loans, the U.S. Department of Veterans Affairs offers one of the best deals around: VA Guaranteed Home Loans, which allow a borrower to buy or build a home without coming up with a down payment. Normally, a lender requires a down payment as collateral, meaning he gets to keep the money if you fail to pay back the rest of the loan. To get around the need for a down payment, the VA home loan program places a guaranty on a portion of the loan. Should the veteran default on payments, the VA will pay the lender (usually 25% of the loan’s amount). This reduces risk for the lender, giving them an incentive to offer a good interest rate and allowing the borrower to steer clear of the expense of mortgage insurance.
But one real estate broker I spoke to says he’s seeing a lot of gay couples who are frustrated because they can’t take full advantage of this program. The VA will guarantee loans for veterans and their spouses, so in order to get a mortgage in both names, you have to be married or both be veterans—a rule that eliminates many same-sex couples who aren’t legally allowed to be married in most states. This means that gay couples buying a home with a VA loan must come up with a down payment for the non-veteran partner’s portion of the loan, or else list only the veteran as the borrower, reducing the income on the application and, potentially, the couple’s chances of qualifying for the loan.
So, if you’re a gay vet, what can you do? Well, the first option is to move forward with the VA loan anyway. Yes, you still have to come up with a down payment, but it’s a lower down payment than you would have had to provide without the VA guarantee. According to the VA’s website, not all lenders will accept joint applications for VA loans if the borrowers aren’t married or both veterans, but if you get a “no,” try another lender. Also try your state’s department of veterans affairs—the states offer their own VA home loans programs, which have rules that are distinct from the federal rules. In California, for example, veterans and their same-sex spouses (if they married in the window before Prop 8) or domestic partners can apply for a VA loan toward a mortgage down payment.
What’s your take on this situation?