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VA Loans and Spousal Debt: What Veterans in Community Property States Need to Know

When you’re a military veteran, few things are as valuable in the homebuying process as your VA loan benefit. It’s one of the most powerful mortgage options available—offering zero down payment, no mortgage insurance, and competitive interest rates.

But there’s a wrinkle that catches many veterans off guard, particularly in community property states like California: your spouse’s debt could affect your loan eligibility, even if they’re not on the loan.

Let’s break this down clearly so you can make smart, informed decisions when purchasing a home using your VA benefits.

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The Power of the VA Loan

A VA loan is a mortgage backed by the U.S. Department of Veterans Affairs, exclusively available to qualified active-duty service members, veterans, and some surviving spouses.

Unlike conventional or FHA loans, VA loans allow for 100% financing—meaning you can buy a home with no money down, provided you qualify based on credit, income, and debt-to-income ratio (DTI).

Most veterans understand that part. What’s less well known is how your spouse’s financial profile can impact your loan approval, even if their name isn’t on the mortgage application.

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Community Property States and Spousal Debt

If you live in a community property state—like California, Nevada, Texas, Arizona, Idaho, Louisiana, New Mexico, Washington, or Wisconsin—spousal debt gets included in the DTI calculation for VA loans.

Here’s how it works:

Even if your spouse isn’t on the loan, the VA lender is required to consider their debts when calculating your debt-to-income ratio. This includes:

• Credit card balances

• Car loans

• Student loans

• Personal loans

Example:

If you’re applying for a VA loan solo, but your spouse has:

• A $500 monthly car payment

• Two credit cards with minimum payments of $150

That’s $650 in monthly liabilities that get added to your debt stack—even if your spouse is not contributing to the loan or ownership.

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Why It Matters

VA loans are unique in that they don’t set a hard cap on DTI, but lenders still use DTI to assess risk.

Typically, VA lenders like to see a DTI of 41% or lower, though some will go higher with strong compensating factors like excellent credit, reserves, or residual income.

If you’re already pushing the upper limit of qualifying—say you’ve got a moderate income or some of your own obligations—your spouse’s undocumented debt can severely limit how much house you can afford, even with the VA benefit in play.

This is especially problematic because most veterans turn to the VA loan to maximize their purchasing power with no down payment. So, anything that chips away at your ability to qualify for a larger loan amount—like added spousal debt—can become a major obstacle.

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The Solution: Offsetting Income

Here’s the good news: if your spouse has income that can be documented, that income can be used to offset their debts—even if they are not on the loan.

Example:

Let’s say your spouse has $650 in monthly obligations but also brings in $3,000 a month from their job.

That income can be used by the lender to offset the debt they bring to the table, effectively removing that liability from your DTI calculation.

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What Kind of Income Counts?

• Regular W-2 employment

• Self-employment with proper documentation (typically 2 years’ tax returns)

• Consistent part-time or seasonal work

• Fixed income such as Social Security or pensions

This is known as a debt offset, and it can make a massive difference in how much you can qualify for when applying for a VA loan.

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Real World Example

Imagine a veteran earning $6,000 a month applying for a VA loan in California.
They have $500 in their own monthly liabilities.
Their spouse has $800 in monthly debts but also earns $4,000 per month from a full-time job.

Without using the spouse’s income:

Total monthly obligations = $1,300 ($500 + $800)
DTI = $1,300 / $6,000 = 21.6%

With offsetting income:

Only the veteran’s $500 obligation is counted
DTI = $500 / $6,000 = 8.3%

That’s a major difference in how much home you can buy.

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Bottom Line

If you’re a veteran looking to use your VA loan benefit, and you’re in a community property state, be sure to:

✅ Disclose your spouse’s debt, even if they’re not on the loan
✅ Understand how that debt will be counted against you
✅ See if your spouse has documentable income to offset that debt
✅ Work with a VA-experienced lender who can help you navigate these nuances

The VA loan is one of the best mortgage products on the market, but like any tool, its effectiveness depends on how you use it.

If you’re planning to buy in California or another community property state, make sure you structure the loan correctly so you’re not caught off guard by how your spouse’s financials could impact your purchasing power.

Looking for a loan? Get a no cost VA rate quote today!