Can You Have a Cosigner on a VA Loan?

A co-signer is a person who agrees to sign a loan on your behalf. Your spouse or a close family member is most often the individual who cosigns your VA loan application.

Having a co-signer on a VA loan is an excellent approach to assisting a veteran in obtaining a mortgage. However, there are several things you should be aware of before enlisting the help of a cosigner.

How Does Co-signing a Mortgage Work?

A co-signer on a home loan agrees to be responsible for the loan if the borrower cannot make the payments. The co-signer has no ownership rights in the property, but they are legally obligated to repay the debt if the borrower defaults. The co-signer must occupy the home as their primary residence.

Co-signing a home loan is a serious responsibility and should not be entered into lightly. The co-signer essentially takes on the same obligations as the borrower, so it is essential to trust that person to make their payments on time. If the borrower does default, the co-signer will be responsible for repaying the entire loan, which could damage their credit score and financial stability.

Co-signers need to understand all the risks involved. Be sure to talk to a financial advisor to see if your decision is suitable.

Co-Borrower Requirements for a VA Loan

For VA loans, co-borrowers are subject to the same qualifications as regular applicants. This may be beneficial sometimes. It could harm in other situations. Calculating another person's income might be expensive since you depend on their credit and financial situation. Each borrower on a loan with you must satisfy the VA's eligibility criteria and the lender's standards for things like the required minimum credit score, the debt-to-income ratio, and other factors.

Minimum Credit Score for a VA Loan

You might be surprised that the Department of Veterans Affairs has no stated credit score requirement for VA mortgages. Since private lenders fund the VA, the credit score requirement will vary from lender to lender.

Many VA lenders consider a credit score of 620 to be a strong indicator of creditworthiness. For some mortgage lenders, a credit score of 580 may be acceptable to get a VA loan.

Who Can Co-sign a VA Loan?

Veterans who qualify for a VA mortgage loan may include a co-signer on their loan application. However, the co-signer must live in the house with the Veteran: & the co-signer must be one of the following:

The spouse of the Veteran, or
An active-duty service member or Veteran

Additionally, the co-signer must be eligible and qualify for the loan.

The co-signer is responsible for repaying the loan on behalf of the Veteran if the primary borrower defaults on the loan and does not have any ownership interest in the property that is the subject of the mortgage loan.

The co-signers credit score, monthly income, and the debt to income ratio are considered when a co-signer is helping the Veteran purchase a home. The debt-to-income ratio refers to how much of the primary borrower and co-signers gross monthly income goes toward paying off debts. Insufficient credit for either the primary borrower or co-signer may jeopardize the loan application.

Joint VA Loan Requirements

For Veterans and non-spouse, non-veteran co-borrowers, lenders provide combined VA loans. For instance, a combined VA loan might be obtained if a Veteran obtained one with their sibling, father, or unmarried significant other.

Although joint VA loan possibilities are conceivable, they vary from conventional VA purchase loan circumstances. They are distinct from one another since the VA will only guarantee the loan's veteran share (half in most cases).

Joint VA loans often require the non-veteran co-borrower to provide a down payment to cover their loan portion. How much is determined by several variables, including eligibility and the cost of the house? Speaking with a home loan expert about joint VA loans is wise since they may get complex quickly.

The non-Veteran must have sufficient income to repay their half of the loan, and the Veteran's income must be sufficient to repay their portion. Closing might be challenging if one or both parties lack the resources to pay their respective mortgage portions.

Can My Girlfriend Be My Co-signer?

Unmarried partners living in the property as their primary home are not permitted to cosign or co–borrow (unless they meet the initial conditions).

Even though the VA permits an unmarried partner on loan, most lenders do not.

But even if the lender agrees to include a non–spouse on the mortgage, the VA guarantee, which essentially pays the down payment, would be cut in half.

This means the VA will guarantee will only cover a part of the loan, and the Veteran will be required to make a down payment to satisfy the lender's 25% guarantee.

For example, if a married couple obtains a VA loan and purchases a property for $200,000, the VA typically guarantees 25% of the purchase price. However, when a veteran/service member applies for a VA home loan with an unmarried non-veteran applicant, the VA guarantees only 12.5 percent of the loan.

In the previous example, the Veteran would need a down payment of 12.5 percent ($25,000) to cover the difference between the VA purchase price and the guaranteed loan amount.

Because of the VA loan program guidelines, an FHA loan might be more suitable if the applicant needs a co-signer.

What if only one applicant is an eligible Veteran?

If two unmarried people co-sign on a VA mortgage loan, only one of them may be eligible for the VA loan guarantee as a service member, veteran, or surviving spouse of a veteran. This means that the VA loan guarantee will only cover the value of the eligible person's share of the home. The co-signer who is not eligible may still help qualify for a loan, but a down payment will likely be required. Remember that the person on loan, whether a co-signer or co-borrower, can play an important role in helping you qualify for a VA loan.

Difference Between Co-Borrower and a Co-Signer

It is important to note that a co-signer on a VA loan and a co-borrower are different.

The advantages of homeownership are frequently shared by a co-borrower, who generally bears the responsibility for mortgage payments and the benefits of homeownership (for example, owning a percentage of the home's equity). A co-name borrower is also included in the title, although a co-name signer is not included.

A co-borrowers income, credit, and assets are utilized to help the borrower qualify for and enhance the VA loan application.

A co-signer assumes responsibility for the debt if the borrower defaults, but this individual is not added to the title as a possessor of the property.

How Do I Remove a Co-signer From My Mortgage?

Co-signers are often removed from mortgages when refinancing, which is usually the only option. When you refinance your mortgage, you can remove the co-signer from the loan and become the single borrower on the new loan, or you might become a co-borrower with someone else. See Interest rate reduction.

Can Two Veterans Buy a Home Together?

Can two veterans combine their VA loan benefits to purchase a home?

Two veterans can combine their VA loan benefits to purchase a home. The VA will charge an equal portion of the loan entitlement to each veteran's account. If one veteran has used up their full entitlement, the other can agree to have more charges against theirs. This is a great option for home buying using a VA loan, especially for applicants with limited loan eligibility. Apply for a VA loan or VA mortgage and take advantage of this VA home loan benefit.

Conclusion

In conclusion, VA loans with a co-signer can be a great way to get into a home, even if you don't have the best credit. Following the tips above, you can ensure you are ready and eligible for a VA loan with a co-signer.

SOURCE:
Cosigner (joint loan) on a VA Loan