Can You Have a Cosigner on a VA Loan?

Can mom and dad cosign your VA loan?

Department of Veteran Affairs pictureA 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 assist a Veteran in obtaining a mortgage. However, there are several things you should be aware of before enlisting the help of a co-signer.

How Does Co-signing Work?

A cosigner on a home loan agrees to be responsible for the loan if the borrower cannot make the payments. The cosigner may not have any ownership rights in the property, but they are legally obligated to repay the debt if the borrower defaults. The cosigner must occupy the home as their primary residence.

Cosigning a home loan is a serious responsibility, and it should not be entered into lightly. The cosigner is taking 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 cosigner will be responsible for repaying the entire loan, which could damage their credit score and financial stability.

Cosigners need to understand all the risks involved. Be sure to talk to a financial advisor to see if it is the right decision.

VA Loan Co-Borrower Requirements

Co-borrowers on VA loans must meet the same requirements as other VA loan applicants. In some cases, this can help; in others, it may hurt. Counting someone else's income can come at a cost — you're at the mercy of their credit and financial profile. Every applicant on a loan with you needs to meet the eligibility requirements of the VA and lender's requirements for things like minimum credit score, debt-to-income ratio, and more.

Minimum Credit Score for a VA Loan

You might be surprised that the Department of Veterans Affairs has yet to have a 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 Cosign on a VA Loan?

Big question markVeterans 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. The debt-to-income ratio refers to how much of the primary borrower and cosigner's gross monthly income goes toward paying off debts. Bad credit for either the primary borrower or cosigner may jeopardize the loan application.

Joint VA Loan Requirements

Lenders provide joint VA loans for Veterans and non-spouse, non-veteran co-borrowers. For example, if a Veteran got a VA loan with their brother, parent, or unmarried significant other, that's a joint VA loan.

Joint VA loan scenarios are possible, but they look different from a typical VA purchase loan. They're different because the VA's guaranty extends only to the veteran's portion of the loan (half in most cases).

With joint VA loans, the non-veteran co-borrower will often need to make a down payment to cover their part of the loan. Just how much depends on a few factors, including entitlement and the home's price. Joint VA loans can get complicated in a hurry, so it's best to talk to a home loan specialist.

The veteran's income must be sufficient to repay their portion of the loan, while the non-Veterans must have adequate income to repay their part. Closing can get tricky if either party needs the financials to cover their part of the mortgage.


Can My Girlfriend Be My Co-signer?

Unmarried partners who live in the property as their primary home are not permitted to cosign or co–borrow (unless they meet 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 a 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 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 cosigner.

What if only one applicant is an eligible Veteran?

When two unmarried individuals cosign on a VA mortgage loan, the VA loan guarantee will limit the amount to the cosigner's portion in the house since only one is an eligible individual (i.e., a service member, a veteran, or a surviving spouse of a veteran). A down payment of 12.5% will probably be required.

Difference Between Co-Borrower and a Co-Signer

It is important to note that a cosigner 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-borrower's name is also included on the title, although a co-signer's name is not included.

A co-borrower's income, credit, and assets are used to help the borrower qualify for and enhance the VA loan application.
A cosigner assumes responsibility for the debt if the borrower defaults, but this individual is not added to the title as a possessor of the property.

Rotating question markFAQs About Cosigners on a VA Loan
Q. Can Two Veterans Buy a Home Together?
A. 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.

Q. How Do I Remove a Cosigner From My Mortgage?
A. Cosigners are often removed from mortgages when refinancing, which is usually the only option. When you refinance your mortgage, you can remove the cosigner from the loan and become the single borrower on the new loan, or you might become a co-borrower with someone else.

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 ensure that you are ready and eligible for a VA loan with a cosigner.

SOURCE:  Cosigner (joint loan) on a VA Loan 
Recommended Reading
 VA Home Loan Inspections: What You Should Know 
 VA Closing Costs: Everything you need to know 

 How to Get Your Certificate of Eligibility for a VA Loan