VA Loans With a Cosigner: What You Need to Know

Can mom and dad cosign your VA loan?

Nice houseA 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?

Happy couple who were approved for a VA home loa.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.