Can Multiple Borrowers Be On A VA Home Loan?
If you are thinking about purchasing a home with a VA home loan, you might be mortified of taking on this massive amount of debt all by your lonesome. Those eligible for VA home loans should know it is possible to secure a VA home loan with another borrower. A VA home loan co-borrower maximizes the chances of approval and ultimately makes it easier to pay off the loan balance in the years ahead.
Qualifying as a Co-borrower
As most would assume, veterans qualify as primary borrowers and co-borrowers for VA home loans. No civilians but for the spouses of veterans can co-borrow on a VA home loan. The veteran selected as a co-borrower must have the intention of living at the home with the other co-borrower. There is no need for the spouse interested in co-borrowing to be a veteran of the armed forces. As long as she or he is married to the veteran in question, that person can qualify as a co-borrower on a VA home loan.
The Challenge of VA Acceptance
The VA might not approve your selected co-borrower for a variety of reasons. If this individual earns significantly less than you or are viewed as a risk for another reason, he or she will not be approved. However, there is still hope. Work within the system, do what you can to improve the proposed co-borrower’s appeal for the home loan and the VA might eventually give the green light.
If you are concerned the VA will not accept the co-borrower in question, ask about that individual’s credit score. A low credit score can preclude the co-borrower from approval for the home loan. It is possible to rectify a poor credit rating yet it will take time. If your co-borrower’s credit score is egregiously low, it might make sense to hold off until the score increases to apply for a VA home loan.
The co-borrower’s income is also of considerable importance. A co-borrower lacking sufficient income to assist with mortgage payments in the years ahead might not qualify for the loan. In an ideal world, the main borrower and co-borrower will be fully aware of one another’s finances before applying for a VA home loan. Most joint VA home loans require a down payment of 12.5 percent as 25 percent of the loan is insured. If merely one borrower is on the loan, the lender has half this guaranty. The comparably large down payment for a VA home loan helps mitigate this risk.
What About Non-spousal Co-borrowers?
The VA does not explicitly bar prospective co-borrowers who are non-spouses from VA home loans. However, VA lenders will not guaranty the portion of the home loan attributed to a non-spousal co-borrower. This is why the vast majority of those who seek a co-borrower on a VA home loan select their spouse. As an example, it is possible to be approved for a VA home loan with an unmarried partner yet such a co-borrower will be subjected to considerable financial analysis before an approval or denial is issued.
Things get interesting when two married or unmarried military veterans apply for a VA home loan. It is possible to use one of the veteran’s eligibility for the VA home loan and reserve the other veteran’s entitlement for use in the future. It is also possible to split the entitlement down the middle or combine the portion of an entitlement that remains from a single borrower from a prior VA home loan with the leftover entitlement of the co-borrower.