Using a VA Loan with Power of Attorney
Sometimes the timing just isn’t quite right. You make plans and life says otherwise and you find out that what you had intended to happen had to make some adjustments along the way. To help prepare for the unexpected, a power of attorney document allows veterans and service members to have another individual sign legal documents on their behalf while away. This can be from a deployment or in the process of a harried PCS. However it is, the power of attorney can be used to sign contracts or otherwise enter into any legal agreements that require the signature of the veteran. And a power of attorney can be used to buy a home.
A power of attorney document, or POA, is in fact a legal document authorizing one individual or even more than one to enter into legal agreements and sign legal papers on behalf of the veteran or service member. Most often it is the spouse that is granted a POA but it can be anyone the veteran trusts to make legal decisions without being present or requiring a live signature from the veteran. Income taxes can be filed using a POA, checking and savings accounts may be opened and so on. Any document that binds one party to perform certain functions and requires a signature to execute the agreement may be used with a POA.
As it relates to VA loans, the POA can also be used and in fact is very common. The VA doesn’t establish what type of POA can be used or what language it needs to contain, that’s under the auspices of both the state where the property is located as well as any specific language the lender may require. In fact, a lender may not accept a broad POA that covers everything from auto loans to income taxes but require a POA specific to the individual real estate transaction.
Real Estate Specific
A “specific” POA is one that is drawn up precisely for the subject real estate transaction. A POA for everything is not acceptable to a VA lender. In addition to legal wording specific to the state in which the property is located, the specific POA must:
- Spell out the exact purpose of the POA, and
- List the particulars of the transaction such as property address, price, loan amount and closing date
The specific POA limits the authorized signator to the individual transaction and clearly states the intentions of the absent borrower. That means should the loan fall out or the deal cancelled, a new POA will need to be drawn.
Many times a real estate attorney or settlement agent will have their own real estate specific POA and provide that to those applying for a VA loan. However, the VA lender will approve the attorney-supplied POA before it can be used. Most often though the lender will have its own real estate specific POA that must be used (learn more here). And should the buyers decide to change lenders, it’s very likely the new lender will require its own POA.
At the closing, the authorized signator will sign on the absent borrower’s behalf. If a couple is buying the home, the spouse will sign for both and it can be a rather tedious process. The signator doesn’t simply write the absent party’s name on the signature line and initial where needed but write something to the effect of “John Doe on behalf of Jane Doe” where required in addition to the POA.
If you don’t at least have a general POA you should get one now, especially so if you’re active duty and if you’re getting close to buying a home and need a real estate specific POA, contact your VA lender in advance and let them know that an absent co-borrower may in fact be in your future. The lender will then walk you through the process to get the correct POA drawn for you once a property is found.