While it isn’t a common occurrence, veterans and military members may be able to purchase with a VA home loan through a revocable inter vivos trust.
This is a legal and financial arrangement where your assets are put into a trust to be utilized during your lifetime. Generally, these types of trusts are created by individuals and can be changed or closed at any point during the person’s life.
The person who set up the trust must be the primary beneficiary, and lenders will underwrite the loan using this person’s credit, assets, income and debts.
Using Trust Income for VA Loans
Lenders may be willing to count income from a trust as effective income toward mortgage qualification. Guidelines and policies can vary by lender.
At Veterans United, in order to consider trust income we would need to see documentation that confirms payment amount, frequency and duration. If the documents don’t clearly define the amount, we’ll typically use a 24-month average based on tax paperwork.
The income must be expected to continue for the next three years.
Trust Documents & Attorney Letter
We’ll also need to obtain copies of all trust documents, along with an opinion letter from a title attorney.
In addition to evaluating credit, debts and assets, underwriters will read over trust documents with a checklist in hand.
Some issues or areas of concern may include:
- Ensuring title insurance protects the lender fully and that title to the property is fully vested in the trustee’s name
- Verifying the property is a single-unit, owner-occupied primary residence by at least one of the people who created the trust
- Making sure the trustee is authorized to borrow money and obtain real property
- Verifying the trust isn’t a fictitious or blind trust or a life estate
We’ll also need to see a title attorney’s opinion letter regarding the trust documentation. These legal documents evaluate the legality of the trust and whether its assets can be used to obtain a home loan.
The attorney’s letter needs to reflect that in his or her opinion:
- The trust was validly created and is duly existing under applicable law
- The trust is revocable
- The borrower is creator and beneficiary of the trust
- Trust assets can be used as collateral for the loan
- The trustee is fully authorized under the trust documents and applicable law to pledge or otherwise encumber the trust assets
Every trust situation is different. Talk with a Veterans United loan specialist if you have questions about getting a VA home loan using a revocable living trust.