VA Loans With a Cosigner: What You Need to Know
Can mom and dad cosign your VA loan?
A
cosigner 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 cosigner on a VA loan is an excellent
approach to assist a veteran in obtaining a
mortgage. However, there are several things you
should be aware of before enlisting the help of a
cosigner.
Who can cosign on a VA loan?
Veterans who qualify for a VA mortgage loan may include a cosigner on their loan application, however the cosigner must live in the house with the Veteran: & the cosigner must be one of the following:
- The spouse of the Veteran, or
- An active-duty service member or veteran
Additionally, the cosigner must be eligible and qualify for the loan.
The cosigner 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 cosigner's credit score, monthly income and the debt to income ratio are considered when a cosigner is helping the veteran purchase a home. Debt-to-income ratio refers to how much of the primary borrower and cosigner's gross monthly income goes toward paying off debts. Needless to say, bad credit for either the primary borrower or cosigner may jeopardize the loan application.
Minimum Credit Score for VA Loan
You might be surprised to learn that the
Department of Veteran Affairs does not have a stated
credit score requirement for VA mortgages. Since the
VA is funded by private lenders, the credit score
requirement will vary from lender to lender.
Many VA lenders consider a FICO score of 620 to be a
strong indicator of credit worthiness. For some
mortgage lenders, a credit score of 580 may be
acceptable.
What if only one applicant is an eligible Veteran?
The VA loan guarantee will be limited to the value of just one of the co-signers' share in the home when two unmarried persons co-sign on a VA mortgage loan since only one of them is an eligible person (i.e., a service member, a veteran, or a surviving spouse of a veteran). It is probable that a down payment will be needed.
Can My Girlfriend Be My Cosigner?
Unmarried partners who live in the property as
their primary home are not permitted to cosign or
co–borrow (unless he or she meets the preceding
conditions).
Even though the VA permits an unmarried partner on
the 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%
guaranty.
For example, if an married couple obtains a VA loan
and purchases a property for $200,000, the VA
normally 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 will only guarantee just 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.
Difference Between Co Borrower and Co Signer
It is important to note that a co-signer on a VA
loan and a co-borrower are not the same thing.
The advantages of homeownership are frequently
shared by a co-borrower, who generally bears the
responsibility for mortgage payments as well as the
benefits of homeownership (for example, owning a
percentage of the home's equity). A co-name
borrower's is also included in the title, although a
co-name signer's is not included.
The income, credit, and assets of a co-borrower are
utilized to help the borrower qualify for and
enhance the VA loan application.
A co-signer assumes responsibility for the debt in
the event that the borrower defaults, but this
individual is not added to the title as a possessor
of the property.
How Do I Remove a Cosigner From My Mortgage?
Co-signers
are often removed from mortgages when refinancing,
which is usually the only option. When you refinance
your mortgage, you have the option of removing the
co-signer from the loan and being 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?
Yes. Two veterans may combine their VA loan benefits to purchase a home. The VA will charge the entitlement to each veteran equally. If one veteran does not have enough remaining entitlement, the other veteran may agree to have more entitlement charged against his or her entitlement.
Conclusion
In conclusion, VA loans with a cosigner can be a great way to get into a home even if you don't have the best credit. By following the tips above, you can make sure that you are ready and eligible for a VA loan with a cosigner.