VA Loan Co-Signer and Co-Borrower Requirements
Veterans can be helped to qualify for a VA loan by having a co-signer, and they can be helped to afford the monthly mortgage payments by having a co-borrower. However, there are restrictions on who is permitted to co-sign or co-borrow.
Key Takeaways
- Co-signer and co-borrower are two different concepts.
- On a VA loan, you are allowed to have a co-signer or co-borrower.
- The financial standing of the co-signer might either assist or damage your application.
- Who can be listed as the owner of a VA loan must adhere to certain criteria and guidelines.
VA Loan Co-Signer Requirements
Co-signers are those who promise to repay a mortgage but do not own the residence. The co-signer will also be held accountable by the lender if the homeowner misses a payment.
When a homebuyer’s personal funds are insufficient to fulfil the requirements for a loan, co-signers for VA loans are employed to help them qualify for a loan. For instance, you may find a co-signer with a higher credit score to guarantee your loan if your credit score isn’t good enough to qualify for a VA loan. This will help your application get granted.
Can you have a co-signer on a VA loan?
VA Loan Co-Signer Risks
Only those with solid money and decent credit should be taken into account as co-signers for VA loans. Your VA loan application might be rejected if your co-signer has bad credit or inadequate financials.
Lenders take into account the following elements to establish a co-signer’s eligibility for a VA loan:
- Income
- Monthly debts
- Tax liens or judgments
- Previous foreclosures or bankruptcies
- Credit score
The stronger your co-signer’s financials are, the more likely you are to qualify for your VA loan.
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Get StartedVA Loan Co-Borrower Requirements
Co-borrowers co-own the property with the Veteran, as opposed to co-signers who have no ownership stake in it. The ownership rights and debt repayment obligations of your co-borrower are the same as yours.
If you want to get the most of your VA loan advantages, your co-borrower should be your spouse or an eligible Veteran who also resides in the house, just like with co-signing.
Who is Eligible to be a Co-signer or Co-borrower on a VA loan?
Anyone may technically sign a VA loan as a co-borrower or co-signer as long as they reside in the same house as the Veteran borrower. However, if neither your spouse nor a qualified Veteran is a co-signer or co-borrower, you might need to fulfil extra conditions in order to qualify for a VA loan.
The VA permits co-borrowers and co-signers who are not spouses or veterans, however in these circumstances, the VA will not completely guarantee the loan. They will only back the loan’s qualifying Veteran’s part. This implies that in order to approve your VA loan application, the lender must take on greater risk. The VA will only pay the lender for your portion of the debt, not the portion owed by your co-borrower or co-signer, if you default on your loan.
In the case of a combined VA loan, your lender may decide to approve your loan application with a non-spouse, non-Veteran co-signer or co-borrower. Nevertheless, the lender will probably demand a down payment due to the greater risk. Standard VA loans, in which all borrowers are eligible Veterans or their spouses, can be provided with 0% down since 25% of the loan is guaranteed by the VA, leaving the other 75% up to the lender to bear the risk. Since they frequently take on up to 80% of the risk for non-veterans who pay 20% down, the lender is willing to tolerate this.
However, the VA will only guarantee the Veteran’s share of the loan (i.e., 12.5% of the total loan amount) if the Veteran files for a VA loan with a non-spouse or non-veteran. Due to the VA’s 12.5% guarantee and the lender’s expected need for a 12.5% down payment, the lender’s exposure will likely remain at 75%.