Joint VA Loan Requirements: Buy a Home With One or Two Veterans
If you are eligible for a VA loan, you have access to a mortgage with very favorable terms. You won’t need to save for a down payment, and interest rates tend to be lower.
However, if you don’t qualify for the loan you want, there is another option. A joint VA loan allows you access to these preferential terms when one borrower is eligible. This means that either you or one of the other borrowers must be a member of the military, a veteran, or a surviving spouse of someone eligible.
A VA joint loan isn’t a traditional type of mortgage, so how does it work, and is it right for you? We look at joint loans from Veterans so that you can decide if it’s a better option.
What is a Joint VA Loan for Veterans?
A joint VA home loan is a traditional VA loan where co-borrowers jointly share the ownership of the home and responsibility for the loan. This responsibility is shared between two or more borrowers; at least one of the borrowers must be a Veteran or VA eligible.
If two people want to take out a mortgage loan together and one of them is eligible for a standard VA loan, they could both benefit from this joint mortgage. This allows them to qualify for a larger loan and home purchase that wouldn’t be available otherwise.
When one of the co-borrowers isn’t eligible for VA benefits, they may need to provide a down payment for that portion of the loan. The Department of Veterans Affairs will insure part of the loan for the co-borrower with VA eligibility, but not for the borrower without that benefit.
Who is Eligible for a Joint VA Loan?
As long as one borrower is eligible for a VA loan, all co-borrowers can benefit from this program.
For borrowers looking to purchase a home with their spouse, a VA joint loan isn’t necessary. With a normal VA loan, married couples are both responsible for repayments, and both their income can be used when applying. This can also apply to engaged couples who plan to marry before the loan closes. This means that the down payment will be fully covered by the VA even if only one of the couple is eligible.
If you fall into one of the following categories, a joint VA loan might be right for you:
- One borrower qualifies, but the others don’t.
- Two or more borrowers qualify and use their VA loan entitlement.
- Two or more borrowers qualify, but don’t all use their VA entitlement.
VA Entitlements
The VA entitlement is the amount of money the government guarantees for your home loan. If you were to default on the loan, this is the amount of money the Department of Veterans Affairs will pay to your lender.
Eligible Veterans receive a basic entitlement of $36,000. This guarantees loans up to $144,000. There isn’t a maximum limit on how much money can be borrowed under this program, with the VA guaranteeing up to 25% of the loan amount.
If the Veteran has never used this benefit, they would likely qualify for the full entitlement. If they have had a previous VA loan, used this entitlement and repaid the loan, they will also qualify for the full amount. If the Veteran already has a VA loan, their entitlement will be reduced, and they may need to pay a down payment.
If two or more of the borrowers are Veterans and eligible for a VA loan, they don’t necessarily need to use all or any of their entitlement. The VA will only guarantee 25% of the portion of the loan for the borrower using the entitlement. Without this guarantee, the borrower will be required to pay a down payment for their share of the loan.
Is a Joint VA Loan Right for Me?
A mortgage is a long-term commitment that will make a significant difference to your long-term finances, so you need to make sure you’re making the right choice. The advantages of this type of loan for Veterans:
- It allows you to leverage multiple incomes to buy a more expensive home.
- You can benefit from competitive interest rates and avoid private mortgage insurance.
- It allows you to use a co-borrower you aren’t married to.
- You can reduce your down payment significantly, or completely, if all borrowers qualify.
You also need to consider the disadvantages:
- You’ll find yourself in a difficult situation if your relationship with the co-borrower ends.
- The ineligible borrower may still need to make a down payment.
- Even if you have a down payment, you may still need to pay the VA funding fee.
- Being a co-borrower on a joint VA loan will use entitlement, potentially making it more difficult to qualify for another loan later.
Qualifying for a VA Joint Loan
While the Department of Veterans Affairs guarantees the loan, they don’t actually lend the money. Most lenders offer VA loans, though not all of them will offer joint loans.
A Certificate of Eligibility (COE) is required when applying for a VA loan. The COE will show whether you have completed enough military service to qualify for this program. Service requirements depend on when and where you served:
- Current active duty. If you have served at least 90 days continuously, you will be eligible.
- Service of at least 90 days during wartime, or at least 181 days during peacetime, makes you eligible. Even if you do not meet these minimum requirements, a discharge due to a service-related disability also counts.
- National Guard or Reserve. You will need to have served at least 90 days of active duty or six years of honorable service. Qualification is also possible if you have had at least 30 consecutive days out of 90 under Title 32.
- A surviving spouse. If your spouse died during their time in the military or as a consequence of their service, you can also be eligible for a VA Certificate of Eligibility.
Approved VA lenders can access your COE, but if you check it yourself, you can be sure you are eligible. You can request your COE on the VA website to get it as soon as possible. Additionally, you can complete a form to receive your COE in the mail.
When requesting a Certificate of Eligibility, you will need form DD-214 (Certificate of Release or Discharge) for active duty. For the National Guard or Reserve, you may require a Statement of Service or a Report of Separation and Record of Service.
Retirement Points Statements can also be required for discharged National Guard and Reserve members. They may also need proof of character or honorable service.
As well as VA eligibility, you’ll still need to meet lender financial requirements to qualify for a mortgage:
Credit score requirements
The VA does not set a minimum score requirement. However, lenders usually have minimum credit score requirements, which is often 620, though it can vary. All borrowers must have satisfactory credit; good credit for one cannot compensate for the bad credit of another.
Debt-to-income ratio
Generally, your debt shouldn’t be more than 41% of your income. A higher ratio might be allowable depending on the lender and your residual income.
Residual income
The VA doesn’t want borrowers to overstretch their finances. If a borrower is using almost all of their income to pay the mortgage, there is a greater risk that they will default on the loan. To reduce the chances of this happening, borrowers must meet the regional minimum residual income.
Employment
The lender will want to see that you and your co-borrowers have a stable employment history. This typically means they need a two-year employment history to show stability and more reliability.
Primary residence
The home must be the primary residence of at least the Veteran or VA-eligible borrower. Other co-borrowers don’t need to live in the home, though some lenders may require this too.
VA Funding Fees
One of the great VA loan benefits is the opportunity to avoid saving for a down payment. However, when using this type of loan, there is a requirement to pay a one-time funding fee. This funding fee is considerably less than a down payment would be, and allows the VA to fund the loan guarantee.
The VA requires the payment of its funding fee, even if you are buying with a down payment. This is 2.15% of the loan amount for the first use and 3.3% after that. This fee is a percentage of the loan the borrower is responsible for when a down payment is less than 5%.
When the down payment is 5% or more, the following fees apply for both first-time use and subsequent uses:
- If the down payment is 5% to less than 10%, the fee is 1.5%
- With a down payment of 10% or more, the fee is 1.25%
This fee doesn’t apply to every borrower, however. If you are a recipient of a Purple Heart or have service-related disabilities, you may be able to avoid the VA funding fee altogether.
Apply for a Joint VA Loan
Lenders offer joint VA loans, although it isn’t as common as a conventional mortgage and can be more difficult to qualify for. Assistance from lenders who specialize in VA loans and are experienced with Veterans looking into VA joint loans will make the process considerably easier.
As with conventional loans, you will need to provide your name, social security number, and previous addresses, so that the lender can check your financial history. The lender will also check your eligibility for a VA loan using a Certificate of Eligibility. If you already have your COE, you can submit it to them. If you don’t have your COE, in many cases, the lender can obtain it for you.
During the underwriting process, the lender will verify your income. To do this, they will need recent pay stubs and bank statements. They will likely require your tax returns for the previous two years as well.
The lender will expect you to sign income and asset disclosures. They will run credit checks to ensure you have a good financial history.
As a veteran, you may be asked for your DD-214 by the lender. These discharge papers and other government-issued photo identification may be required to satisfy the lender’s checks. Of course, borrowers who aren’t eligible for VA funding won’t have to submit those types of documents, though they will go through the other checks and disclosures.
The lender will use this information to check that you meet their minimum credit score and debt-to-income requirements. They will also want to see that you have money ready to pay the closing costs. These closing costs can be as much as 5% of the loan amount, and include things like appraisal fees, title fees, home inspection fees, and the cost of arranging the loan.
When this has been approved, you should be ready for closing day. On closing, you will have to sign the documents and pay the closing costs. With that complete, you can take possession of the home.
Summing Up Learning How Joint VA Loans Work for Veterans
With a VA joint loan, multiple borrowers can benefit from better terms and possibly lower interest rates. If you are eligible for this VA loan program but can’t afford the home you want, a co-borrower without this eligibility could help.
While VA loans offer many advantages, they aren’t necessarily right for every Veteran who is eligible. A joint loan also means you are sharing the responsibility with the other borrowers, and if you don’t remain on good terms, this could become difficult.
But if you have served, consider using a joint VA loan to help you better afford your next home.
FAQ
- Is there a maximum loan amount with VA loans for Veterans?
Officially, there isn’t a limit on how much can be borrowed without a down payment when you have full entitlement. Without full entitlement, the lender may look at local conforming loan limits and may require a down payment. The lender will also look at your income to assess how much you can afford to repay
- Can I get a VA loan if a close relative served?
If your deceased spouse had VA entitlement, you may qualify for a VA loan. If their passing was a result of their service, you should be able to qualify. But the same doesn’t apply if a parent or sibling were eligible; in that case, you won’t qualify without your own service.
- Do you have to be a U.S. citizen for a VA joint loan?
In some circumstances, you do not need U.S. citizenship to be part of a VA joint loan. As a legal resident with a green card or suitable visa, you can be part of a joint loan along with a VA-eligible borrower. A non-citizen will still need to meet income, debt, and credit requirements to qualify. They will also be expected to have a down payment for their portion of the loan.
- Can unmarried couples use joint VA loans?
If you are married and a Veteran with eligibility, you do not need a joint VA loan. But as an unmarried couple, your income and assets are not treated as combined, and a VA joint loan is the only way to have co-borrowers. It doesn’t matter whether you are in a romantic couple, just friends, or siblings; the application works the same way. At least one applicant has to have VA eligibility, and non-eligible borrowers will need to pay a down payment for their share of the loan.
About the author: This article was written by Luke Skar of MadisonMortgageGuys.com. As the Social Media Strategist, his role is to provide original content for all of their social media profiles as well as generate new leads from his website.
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