Q: I am a disabled veteran and would like to get a VA loan with my wife on the mortgage.

Two banks said I can’t put my wife on the loan because she had a foreclosure three years ago due to a divorce. Her ex-spouse claimed bankruptcy, but she didn’t.

The VA said they don’t have a problem securing a loan with her on it as long as my credit is good and I am the veteran. She has had some bad credit in the past but is current on all her bills for the last year.

Are there banks out there that are willing to give us a VA loan? If the VA is willing to secure the loan isn’t the loan then a low risk to the bank? Please help.

A: Unfortunately, even though the Veteran’s Administration will secure the loan, it doesn’t originate them. You have to get a mortgage lender to agree because there are risks for that lender. In the current market environment, most mortgage lenders are looking to reduce their risk and make sure they follow stricter loan guidelines for their loans. While VA lenders do follow the Veterans Administration’s guidelines for their loans, they also will be looking to determine your credit risk and the credit risk of any co-borrower. If you have no income other than your VA disability payments, you may not qualify for a VA loan.

The real issue for you is whether you need your wife on the loan to get approved. If you can get the loan with your disability pay and other income, you might want to go down that road. Your wife might still be able to own the home with you but the sole borrower on the loan would be you. If that works for you, then find a lender and move things forward. If you need your wife’s income to qualify for the loan, the lender will need to review your wife’s credit history, credit score and other issues that impact her income.

It’s a bit more complicated for you if you need your wife’s income to qualify for a loan. While you indicated that your wife’s ex-spouse filed for bankruptcy protection and their former home went into foreclosure, the foreclosure is probably an issue for any current lender. If her credit score and credit history is below the minimum guidelines set for the loan, you may have trouble using her as a co-borrower.

If your wife and her ex-husband owned the home that went into foreclosure together and they took out a loan together, that old lender now shows the foreclosure on your wife’s credit history.

If the divorce decree granted ownership of the former home to the ex-husband and made his solely liable for the debts on the home, you might be able to get somewhere with your current lender. But you also referenced that your wife has poor credit and has only started to pay her bills on time for the last year. Her poor credit could cause her loan application to be rejected
But there may be lenders who can help. You should go back to the VA and tell them you’re having this problem and ask them to recommend a lender who might be able to work with you. You might also want to talk to local banks that keep a portion of their loans in their own investment portfolio. They might have looser lending rules than other banks. Few may, but you may find one in your area.

If you do buy the home, you will need to determine how you and your wife will own the home. If the lender does not allow your wife to apply for the loan but allows you and your wife to hold the title to the home, you’ll need to remember that any late payments on the mortgage will affect your credit history and score and not your wife’s. You’ll also need to remember that she is not personally obligated under the mortgage.

But if the lender won’t allow her to be on title, you then must make sure to have a will drafted to make sure your wishes are met should something happen to you. You might also decide to talk to an estate planner to work through any issues you have relating to the home and other assets you own jointly or separately. As you look over your finances, make sure you are working with a lender that works extensively with veterans and knows the VA loan rules. Before you put any money down on a home or money down for a loan, go over those requirements with the lender and make sure you can satisfy them.

Good luck.