Yes. Eligible surviving spouses can use VA loan benefits including zero down payment and no private mortgage insurance. Qualifying surviving spouses are generally those who are unremarried and whose veteran spouse died on active duty or from a service-connected disability. Surviving spouses who are receiving Dependency and Indemnity Compensation (DIC) are exempt from the VA funding fee entirely.
Who Qualifies as an Eligible Surviving Spouse
The VA defines eligible surviving spouses as those who were married to a veteran who died on active duty, died from a service-connected disability, or was continuously rated totally service-connected disabled for at least 10 years before death. The surviving spouse must have been legally married to the veteran at the time of death and must not have remarried, with some exceptions. Surviving spouses of veterans who are officially listed as missing in action (MIA) or prisoners of war (POW) are also eligible while that status remains in effect.
The Remarriage Rule and Its Exceptions
Surviving spouses who have remarried generally lose VA loan eligibility. However, if the remarriage ended due to death or divorce, VA loan eligibility may be restored. A surviving spouse whose second marriage ended can reapply for VA eligibility. This rule has been updated over the years, so surviving spouses who previously lost eligibility due to remarriage should verify their current status, as they may have regained it.
DIC Income and the Funding Fee Exemption
DIC (Dependency and Indemnity Compensation) is a monthly benefit paid by the VA to eligible survivors of military service members who died in the line of duty or from a service-connected illness or injury. Surviving spouses who are receiving DIC are exempt from the VA funding fee on home loans. This mirrors the exemption given to veterans with service-connected disability ratings of 10% or more. On a $350,000 purchase, the funding fee exemption saves approximately $7,525. Combined with zero down payment and no monthly PMI, the DIC survivor benefit makes VA financing one of the most favorable mortgage structures available to anyone.
The COE Process for Surviving Spouses
To establish VA loan eligibility as a surviving spouse, the veteran's DD-214, the marriage certificate, and the veteran's death certificate are required. For surviving spouses receiving DIC, the VA award letter establishing DIC status is also needed. Some surviving spouses need to file VA Form 21P-534EZ to formally establish eligibility. Dan handles the COE process for surviving spouses and works directly with the VA when documentation requires more coordination than a standard veteran case.
How DIC Income Qualifies for a Mortgage
DIC payments are non-taxable income that can be used for mortgage qualification. Because DIC is non-taxable, it can be grossed up by 25% for qualifying purposes on most loan programs. If a surviving spouse receives DIC of $1,800 per month, the qualifying income figure can be $2,250 per month, which meaningfully improves the debt-to-income calculation. Surviving spouses who also receive Social Security survivor benefits, pension income, employment income, or other sources combine those with DIC for total qualifying income.
This is the most underused VA benefit I encounter. I have worked with surviving spouses who have been renting for years because they assumed the VA benefit died with their spouse. In many cases it did not. If you lost a spouse to service-related causes or on active duty, and you haven't remarried, your eligibility is very likely intact and worth verifying. The funding fee exemption and zero down payment are exactly as valuable to a surviving spouse as they are to the veteran. A phone call to confirm eligibility costs nothing.
Have a situation like this?
Call Dan at (661) 342-9381. He will review your specific situation in a free call.