Joint VA Loans: What They Are and What You Need to Know
There are three commonly used joint loans available to qualified veterans. The first type of joint loan is fully guaranteed if the borrowers are married and at least one is a qualified veteran. Often, the couple combines the power of two incomes to apply for a larger loan. In the second instance, unmarried, qualified veterans go in together on a fully guaranteed joint loan with one or both veterans using their eligibility. For these types of joint VA loans, there are no requirements for a down payment. In the final instance, a friend or other party agrees to co-sign for a home loan. Under the rules of these VA loans, only the loan portion belonging to the qualified veteran receives a pro-rated VA guaranty.
The final type of joint VA loan, where a non-spouse, non-veteran co-signs for the loan, can be difficult to obtain since the lender assumes a higher risk if the mortgage is foreclosed or goes into default. For that reason, lenders can require a down payment to offset the risk. Another regulation ensures that the military member or veteran has sufficient income to pay on their portion of the joint loan. Since both co-applicants will be required to provide income data and credit scores, qualified veterans should be sure their co-signers have favorable debt-to-income ratios.
Understanding the Pro-rated Guarantee on Joint VA Loans
Pro-rating on the guarantee, for example, looks like this:
- Two borrowers with only one using VA entitlement
- Purchase price: $200,000
- Veteran's portion: $100,000
- Maximum guaranty = 25 percent ($25,000)
In the instance of a non-qualified joint VA loan participant, the lender can choose to accept a 12.5 percent guaranty or assess a down payment to lower the risk. The lender must submit the joint applications to the VA prior to granting the loan. Under VA income requirements, the loan will not be approved if the non-military participant assumes the bulk of the loan to make up for income shortfalls by the veteran.
Joint Loan Occupancy Requirements
Under VA regulations, any qualified military member or veteran using their entitlement on a joint VA loan must certify their intention to live in the residence. There is no occupancy requirement for a borrower (including non-military members) who do not use an entitlement. The provision protects the VA from authorizing loans to veterans who may be buying property for friends or family outside the marriage.
Properties Allowed Under Joint VA Loans
VA loans can be used to buy a manufactured home or condominium in an approved project, build a new home, or buy and improve an existing home. Veterans and non-veterans joining a single VA loan can purchase multi-family properties, but the qualifying veteran using entitlement must use one unit as a principal residence. If the property is purchased by two or more qualified military or veteran borrowers, the VA sets limits at one residence for each co-signer, and an additional four family units and one business unit. For properties exceeding four family units, one business unit, and one family unit for each joint participant, the VA will not authorize a guaranty.