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How and When to Get a Joint VA Loan
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A joint VA loan is a home loan backed by the U.S. Department of Veterans Affairs for a military borrower and one or more additional co-borrowers. The other borrowers don’t have to be in the military, but they can be. If multiple military borrowers are involved, they can also use their entitlements.
What are joint VA loans?
A joint VA loan is a mortgage that an eligible military borrower and one or more additional borrowers take out. It’s considered a joint loan if both the military borrower and the other borrower are responsible for the mortgage and own the home together. Active-duty military servicemembers, veterans and eligible spouses can use the VA loan benefit.
When applying with a non-military borrower, your VA entitlement applies only to your share of the mortgage. Your “entitlement” is the portion of the loan that the VA will guarantee to your lender if you fail to repay it. If you have full entitlement, the VA will guarantee up to 25% of your share of the loan amount. For example, if you apply jointly with a non-military borrower, your entitlement will apply only to your part of the mortgage.
Different types of joint VA borrowers
Joint VA loans involve two different sets of borrowers:
This is when a military borrower completes a VA loan application with one or more non-military borrowers. For example, the mortgage could be split between two military borrowers using their entitlements and one non-military borrower. It could also be three military borrowers applying together, but one isn’t using their entitlement.
One important note is that loans taken out by a military borrower and a spouse who isn’t in the military or is a servicemember but isn’t using their entitlement aren’t considered joint VA loans. Spousal applications are handled differently than joint VA applications.
For example, on a spousal application, the spouse’s income is always included when it comes to qualifying for a loan unless they aren’t on an application. With a joint military/non-military loan, the military borrower must earn enough income to cover the non-military borrower if they are unable to pay.
Two (or more) military borrowers
With this type of joint VA loan, all the borrowers involved are using their entitlements. Loans with a spouse who is using an entitlement are considered joint loans. Each military borrower’s entitlement is applied to their share of the loan, and funding fees are divided equally between all the borrowers unless they have an exemption.
If all the borrowers on a VA loan joint application are military, the credit and combined income of all parties involved will be considered. A military borrower with higher income or assets can compensate for a military borrower with less income or fewer assets. All military borrowers must meet the lender’s credit requirements, though.
When to use a joint VA loan
A joint VA loan makes sense in several scenarios:
- You don’t have the income to qualify on your own. If you apply with other eligible military borrowers, they can help you qualify with their income.
- You have too much debt to qualify on your own right now. Lenders prefer a debt-to-income (DTI) ratio of 41%, although they sometimes make exceptions. All your debt counts toward this ratio (including student loan payments). If you apply with another eligible military borrower with less debt and/or a higher income, that could bring down your DTI ratio.
- Your VA entitlement is used on another home. If your current home has a VA loan and you need to buy a new home before selling it, your entitlement will be reduced or eliminated. If you have a partial entitlement, borrowing with another military borrower who has a full entitlement will ensure more of the home is guaranteed by the VA.
- You want to purchase a multifamily home with more than four units. With military VA loan co-borrowers, you can buy a four-unit property with one family unit for each military participant, and one business unit. For example, two military borrowers could purchase a six-unit property with one business unit.
How to qualify for a joint VA loan
You’ll need to follow these steps to qualify:
1. Verify your eligibility You need to obtain your Certificate of Eligibility (COE) through the Department of Veterans Affairs.
2. Verify your entitlement If you’ve never used your home loan benefit or your previous VA loan has been paid in full, you have your full entitlement. Your COE will list your entitlement.
3. Know your funding fee VA funding fee guidelines state that if you make a down payment of less than 5% and it’s your first use of your VA loan benefit, the funding fee is 2.3%. After the first use, the fee increases to 3.6% if the down payment is less than 5%.
4. Know minimum VA mortgage requirements While the VA doesn’t have a minimum credit score requirement, lenders typically have a minimum of 620. VA loans don’t have mortgage insurance and they have no down payment requirement.
Pros and cons of a joint VA loan
- You can buy a more expensive home than you could on your own. The income of all borrowers is considered.
- You can purchase a multifamily property with no down payment.
- You can fix up an existing home or build a new one.
- You may have to make a down payment if one of the borrowers is not a spouse or a military borrower using their entitlement.
- You’ll need to involve other owners in decisions about selling or refinancing.
- You may tie up your entitlement, making it harder for you to purchase a home using VA benefits in the future. You can’t access your full entitlement again until your VA loan is paid off.
Where to find lenders that offer joint VA loans
Visit the VA website to search for approved joint VA lenders. Shop around with multiple lenders to ensure you find your best interest rate and the lowest VA loan fees, too. Look for a lender experienced with VA loans that has a stellar reputation and provides excellent service when you request quotes.