With benefits like no down payment required and free mortgage loan counseling, it’s no surprise that U.S. Department of Veterans Affairs (VA) loans are a popular choice for the military community. To apply for a VA loan, you must first meet minimum service requirements.
Non-military borrowers can, however, participate in the program through joint VA loans. Continue reading to learn how the process works, how it differs from a typical VA loan, and how to apply.
How Do VA Joint Loans Work?
A joint VA loan means that at least two people applied for a VA loan at the same time. The other borrowers are not required to meet eligibility conditions as long as one of the applicants qualifies for the entitlement. If the loan is granted, borrowers will share repayment obligation.
The VA categorizes these loans into two types:
Veteran/nonveteran joint loan: This loan is available to any borrower combination that includes at least one veteran and one nonveteran.
Two veteran joint loan: This loan requires at least two veterans to apply together, each with their individual VA entitlement. Despite the name, it can involve loans with three, four, or more veterans — but all of them must use their entitlement.
There is no legal limit to the number of persons who can be on a mortgage. However, lenders normally set their own boundaries, and everyone involved must typically qualify for the loan.
Keep in mind that lenders, not the VA, make the loans. Because the lender is carrying the risk for the mortgage, you must meet the lender’s requirements for items like debt-to-income (DTI) ratio and credit score.
Traditional VA loans vs. joint VA loans
The VA guarantees a part of all VA loans made. This security enables lenders to offer benefits such as no down payment and lenient qualification conditions when compared to conventional loans.
However, the VA only provides these guarantees to eligible service members. When civilians co-apply for a joint VA loan, the VA makes no promises for them.
To mitigate this risk, lenders may require a down payment from non-military co-borrowers.
Who is Eligible for a Joint VA Loan?
When there is no marriage, anyone can be a co-applicant for a joint VA loan, as long as at least one of the applicants meets the minimum service requirements to qualify for a VA loan.
The VA frequently provides the following examples:
One veteran taking advantage of their entitlement and four nonveterans
Two veterans are taking advantage of their entitlements, while two others are not.
Three veterans and one nonveteran are utilizing their entitlements.
When spouses are involved, the technical terminology can vary depending on who served.
Joint VA loans and spouses
We’ve divided the following parts into distinct sorts of spousal relationships to (hopefully) minimize confusion: non-military spouse, military spouse, and surviving spouse.
spouse who is not a military member
If you are the non-military spouse of an eligible service member, you can apply for a VA loan alongside your spouse. However, the loan is not considered a joint loan; the lender views you as a single entity. That’s great news because both of your incomes are taken into account, and you don’t require a down payment.
Spouse of a military member
If you and another eligible service member co-apply and intend to use your entitlement, your loan will be classified as a two veteran joint loan. While you will still not require a down payment, an additional benefit is that the VA funding cost will be split between you. If one of you does not use your entitlement, the loan will not be considered a joint loan.
You may be eligible for a certificate of eligibility (COE) if you are the surviving spouse of a veteran. This suggests you may be eligible for a VA loan. You are the eligible candidate as the surviving spouse with a COE, which means you could apply for a joint VA loan with a co-applicant.
Should You Think About a Joint VA Loan?
Now that you understand how the process works and who is qualified, we’ve compiled a list of the benefits and drawbacks of joint VA loans. This manner, you can determine whether applying makes sense for your circumstances.
THE BENEFITS OF A JOINT VA LOAN
Could assist you in qualifying for a larger loan
By combining your wages with your co-applicants, you may be able to qualify for a larger loan, allowing you to purchase a more costly home.
Smaller down payment (or none at all)
There will be no down payment requirement if everyone on the application is an eligible military member. Even if you are not a service member, you will be required to make a down payment on the portion of the loan that is not guaranteed by the VA. This could imply paying a lower down payment than you would normally for the same home.
Repayment liability is shared.
You’re all accountable for the monthly payments, so it’s not entirely on you. Sharing the financial burden can alleviate a great deal of stress.
CONS OF A COMBINED VA LOAN
Fee for VA funding
While qualifying service members will not be required to make a down payment, they will be required to pay the VA funding fee. This can range between 1.25% and 3.3% of the loan amount.
Payment in advance
If there are non-military co-applicants on the loan, the lender may require a down payment for their portion of the loan.
The credit history of a co-applicant may be detrimental to you.
When applying for a loan with a co-applicant, all applicants will be subjected to underwriting. The individual with the worst credit will be given the same weight as the person with the best credit. This can result in higher interest rates or, if the credit score is very low, the loan being denied.
Making decisions together
When you are a co-borrower, you must reach an agreement to make decisions such as selling the property or refinancing. This could become an issue in the future depending on how your relationship with your co-borrower(s) matures.
Other Joint VA Loan Eligibility Criteria
Although VA loan requirements are typically less stringent than those for conventional loans, applicants must still meet certain criteria. Your lender will consider the following parameters for all loan applicants:
The good news is that the incomes of co-applicants can be assessed together to determine repayment capabilities. The bad news is that it can be difficult if one of the applicants has a low income (more on that below).
Credit score: Although the VA does not prescribe minimum credit scores for VA loans, lenders are free to set their own as long as they analyze an applicant’s whole loan profile. For loan acceptance, each applicant’s credit must be deemed satisfactory.
Occupancy: Qualifying military personnel who use their loan entitlement must reside in the home. Non-military co-applicants, as well as qualifying service personnel who do not use their entitlement, are not required to dwell in the home.
Income requirements for joint VA loans
When a co-applicant has what a lender considers a “weak” income, the ability of the other applicants’ financial strength to overcome that weakness is limited. It is determined by the type of joint loan and the applicant with the lower income.
If the loan is for two veterans, and all applicants intend to use their entitlement, the strength of one applicant’s income may compensate for the weakness of another.
However, if the loan is a veteran/nonveteran joint loan, the veteran must have sufficient income to cover their half of the loan. While their income strength might be used to balance the nonveteran’s income weakness, the nonveteran’s income cannot be used to offset the veteran’s income weakness.(1)
In other words, if you are ineligible to apply for a VA loan on your own, your income cannot be used to assist a qualifying co-applicant. However, their earnings could be employed to assist you.
How to Get a Joint VA Loan
Remember that the VA guarantees VA loans but does not make them. To get a loan, you’ll need to engage with a mortgage lender. Here are some of the next steps in that procedure.
Determine who will apply with you: The first thing you need do is determine who will apply for the loan with you. Make certain that at least one of you has a COE. Otherwise, the whole thing will be a waste of everyone’s time.
Locate a lender: You should have no trouble finding lenders who provide VA loans. The key will be to choose a lender with whom you feel at ease. Here are some questions to ask lenders when you begin your search.
Compile documentation: Everyone on the application must submit documentation for review. If even one candidate fails to submit a required piece of proof, the entire procedure is halted. The more users on the application, the more difficult this phase might be.
Apply for pre-approval from the VA: Once you’ve gathered all of your papers, you’ll fill out an application and submit it to your lender for approval. During this stage, you should maintain constant contact. You’re ready to start house hunting once you’ve been preapproved.