VA loans allow Veterans to have a co-borrower or co-signer on the loan. Here we break down co-borrower requirements and provide common scenarios around co-borrowing and joint VA loans.
Many Veterans who utilize the VA loan do so with another applicant. It often makes sense for prospective homebuyers to want or need another applicant on their VA loan. Using another person's income, credit score and debt level can do wonders for loan qualification.
However, not all co-borrowing scenarios are easy, and some may be harder than others. Below we break down everything a Veteran should know about VA loans with multiple applicants, including co-signers, common co-borrower scenarios and co-borrower requirements.
To receive the most out of your VA loan benefit, co-signers must be qualified military members or spouses. The VA will only guarantee the eligible Veteran’s part of the loan. If your co-signer is not your spouse or an eligible Veteran, you may want to look into a joint VA loan.
Co-signers do not have property ownership on a VA loan. However, if the homeowner defaults on the loan, the lender will hold both the homeowner and the co-signer responsible. Most often, VA loan co-signers are used to help homebuyers qualify for the loan when their personal finances are not strong enough.
Yes, VA loans allow co-borrowers on the loan. Acceptable co-borrowers include a Veteran and non-veteran spouse, two married Veterans where only one Veteran uses their entitlement, two married Veterans where both Veterans use their entitlement, and two non-married Veterans where both Veterans use their entitlement. The VA also allows what's known as a joint VA loan, where the Veteran applies with a non-Veteran, non-spouse.
A co-borrower on a VA loan typically includes the Veteran and their spouse but may also include another Veteran who isn't their spouse.
Co-borrowers on VA loans must live in the home and meet the same financial guidelines as other VA loan applicants. In some cases, this can help. In other cases, it may hurt. Counting someone else's income can come at a cost — you're at the mercy of their credit and financial profile.
The VA typically allows a max of four borrowers on any loan. For co-borrowing, this includes:
The VA doesn't expressly prohibit non-spousal co-borrowers, otherwise known as a joint VA loan. In those instances, the agency tells VA lenders that it will only guarantee the eligible borrower's portion of the home loan. That leaves a chunk of the mortgage without the government backing the program relies upon.
Does that mean you can't secure a VA loan with your fiancé or fiancée, your long-time significant other or your civilian neighbor? No.
Let's take a deeper look at joint VA loans and their requirements.
Lenders, including Veterans United, provide joint VA loans for Veterans and non-spouse, non-veteran co-borrowers. For example, if a Veteran got a VA loan with their brother, parent or unmarried significant other, that's a joint VA loan.
Joint VA loans are absolutely possible, but they look different from a typical VA purchase loan. They're different because the VA's guaranty extends only to the Veteran's portion of the loan (half in most cases).
Most of the time, joint loans wind up requiring a down payment to account for the part the VA doesn’t guarantee. The amount depends on a few factors, including entitlement and the home's price.
Outside of the down payment, the Veteran's income must be sufficient to repay their portion of the loan. Joint VA loans can get complicated in a hurry, which is why it's best to talk to a home loan specialist.
Let's look at some VA loan co-borrowing scenarios and how they might play out in your VA loan process.
Some co-borrowers will be subject to more financial scrutiny than others. If you plan to co-borrow with an unmarried partner or friend who will live in the home with you, plan on needing money for a down payment. Remember that the VA will only guarantee the VA-eligible borrower's portion of the loan. This also applies to VA refinancing.
Having a spouse or eligible Veteran on the loan with you doesn't trigger any down payment needs. Being able to purchase with $0 down is a significant financial benefit of the VA loan and one that nearly 8 in 10 VA buyers took advantage of last year alone.
Two eligible Veteran borrowers have some options when it comes to using their VA home loan benefits. You can use all of one borrower's entitlement and save the other for future use. You can also split your entitlement evenly or combine the remaining entitlement of one borrower from a previous VA home loan with the remaining entitlement of the other borrower.
A Veteran whose entitlement is being used on the loan and their spouse currently live in Georgia and the Veteran has been offered a job in Missouri, causing them to purchase another home in Missouri. The spouse will not immediately move to Missouri with the Veteran as she must stay in Georgia another five years for employment reasons.
At Veterans United, if the Veteran plans to live in the home and the spouse’s income is reliable, the loan may move forward.
Co-borrower relationships can get tricky post-purchase, too.
For example, if a couple purchases a home with a VA loan and then experiences a divorce, the civilian spouse is not automatically eligible to refinance the home with a VA loan.
Buying a condominium with you VA home loan benefit is a great option. However, there are additional requirements that differ from purchasing a single-family residence or a multiunit complex.
Compared to Veterans, civilians feel less financially stable, less optimistic about their finances and less capable of securing a home loan, according to Veterans United Home Loans’ most recent Veteran Homebuyer Report, a quarterly national survey of Veterans, service members and civilians who intend to buy homes in the next three years.