Joint VA Loan: What It Is And How To Apply

Joint VA Loan:

VA loans, backed by the Department of Veterans Affairs (VA), offer a desirable mortgage option with no required down payment. However, eligibility for a VA loan is limited to members or veterans of the U.S. military, or their unmarried, surviving spouses.

This changes when considering a joint VA loan.

A joint VA loan involves multiple borrowers on a single mortgage, where at least one applicant meets the VA’s military service criteria, while the other borrower(s) do not need to have military or veteran status.

What Is A Joint VA Loan? 

In a joint VA loan arrangement, several applicants, including at least one who qualifies through military service or as a surviving spouse of a veteran, come together to secure a VA loan.

All parties involved are equally responsible for the loan’s monthly payments, which are guaranteed by the government.

Benefits of Joint VA Loans 

Joint VA loans are advantageous for eligible participants seeking to avoid a down payment. Since VA loans inherently do not require down payments, as long as one borrower fulfills the military service condition, there’s no need for a down payment for that portion of the loan. However, civilian co-borrowers might still need to contribute a down payment for their share.

Furthermore, VA loans are appealing due to their status as nonconforming loans, meaning they do not adhere to the criteria of Freddie Mac and Fannie Mae. The partial government insurance on VA loans allows for more lenient lending requirements, safeguarding lenders against loss if a borrower fails to meet payment obligations. This government backing also facilitates lower down payment requirements and potentially easier qualification for those with lower credit scores.

Lenders may also consider the combined income of all applicants in the decision-making process for a joint VA loan.

Types Of Borrowers For Joint VA Loans 

Joint VA loans cater to several borrower scenarios:

• A scenario where one VA-eligible borrower partners with one or more non-eligible borrowers.
• A situation where all borrowers are VA-eligible and utilize their VA entitlement.
• A case where multiple VA-eligible borrowers apply, but not all use their VA entitlement. For married couples applying together, there’s no need for a separate joint VA loan application, as they are considered a single entity under VA loan rules, even if only one partner has military service. Both incomes can be included in the application.

In essence, a joint VA loan allows a group of borrowers, including at least one who qualifies under VA guidelines and one who does not, to jointly apply for a VA mortgage. All borrowers share the responsibility for the loan repayment.

Understanding Joint VA Loans and VA Entitlements 

Grasping the concept of joint VA loans necessitates a comprehension of what VA entitlement signifies.

VA entitlement refers to the guarantee amount provided by the Department of Veterans Affairs for your VA loan. This guarantee is essentially the Department’s commitment to cover up to 25% of your loan amount with your mortgage investors, should you fail to continue making payments and default on your loan.

As of the year 2020, individuals who possess full VA loan entitlement are not subjected to borrowing limits, allowing them to secure a loan without a down payment. For these individuals, the VA assures lenders up to 25% of the loan value in scenarios where the borrower ceases to make mortgage payments.

The full entitlement is typically available to most veterans or active-duty military personnel who either have not utilized a VA loan previously or have settled a prior VA loan and disposed of the property bought with that loan.

In cases involving joint applications for a VA loan by two or more eligible borrowers, it’s not mandatory for each applicant to utilize their VA entitlement. When applying for a joint VA loan, if only one of the VA-qualified borrowers decides to use their VA entitlement, then the Department of Veterans Affairs will guarantee only the portion of the loan that pertains to the entitlement-utilizing borrower.

Distinguishing Joint VA Loans from Standard VA Loans 

The primary distinction between a joint VA loan and a standard VA loan lies in the applicant configuration. Specifically, when a veteran or an active-duty service member teams up with an unmarried, non-military individual for a loan, the lender might stipulate a down payment. Generally, this down payment is required from the non-military participant for the loan portion not backed by the Department of Veterans Affairs.

The VA’s guarantee extends only to the loan segment associated with the eligible borrower. This limitation elevates the risk for the entire loan, prompting lenders to possibly demand a down payment from any applicant who either doesn’t qualify for VA benefits or chooses not to employ them.

Advantages and Disadvantages of Joint VA Loans 

Joint VA loans come with their share of benefits and drawbacks.

Advantages

• The potential to qualify for a larger loan amount, enabling the purchase of a higher-priced home through combined incomes.
• The opportunity to co-borrow with friends or relatives.
• No down payment requirement if you’re co-borrowing with other VA-eligible individuals.

Disadvantages

• A required down payment from co-borrowers without VA eligibility.
• All borrowers are subject to the VA funding fee, which is 3% of the total loan amount for first-time VA loan users without a down payment, unless a waiver applies.

If these disadvantages seem significant, exploring alternative home financing options, such as conventional loans with a minimum 3% down payment or FHA loans that offer a 3.5% down payment for those with suitable credit scores, might be worthwhile.

Applying for a Joint VA Loan 

To apply for a VA loan, which is guaranteed by the Department of Veterans Affairs, prospective borrowers should engage with a private mortgage lender that offers VA loans.

Steps to Apply:

1. Select a Lender and Submit an Application: Provide necessary personal details, authorize a credit check, and submit a Certificate of Eligibility (COE).
2. Compile Required Documents: Prepare and provide financial documents like recent pay stubs, bank statements, and tax returns for the past two years for income verification.
3. Fulfill Loan Qualifications: Typically, a minimum FICO® score of 580 is required, with your debt-to-income ratio not exceeding 43% of your gross monthly income.
4. Demonstrate Savings: Lenders often require proof of sufficient savings to cover at least two months’ mortgage payments, as a safeguard against potential financial difficulties.

By following these steps and meeting the lender’s requirements, applicants can navigate the process of securing a joint VA loan.

Joint VA Loan Common Questions

Many people have inquiries regarding joint VA loans. Below are some of the most commonly asked questions.

Can unmarried partners apply for a joint VA loan? Absolutely, an unmarried pair, be it friends or siblings, can seek a joint VA loan. The application process remains the same, with lenders evaluating the income of both parties.

What about the limits on joint VA loans? Yes, there are limits to how much you can borrow with a joint VA loan. However, applying with another borrower might allow for a larger loan amount compared to applying solo.

Is it possible for a non-U.S. citizen to be part of a joint VA loan? A non-U.S. citizen can be included in a joint VA loan application provided they have legal residency status.

What requirements must co-borrowers meet for a VA loan? Co-borrowers on a VA loan are subject to the same financial scrutiny as any other applicant. Those who do not meet VA eligibility may need to contribute a down payment for their share of the mortgage.

Deciding on a Joint VA Loan

For veterans or active military personnel, a joint VA loan could be a viable option. Understanding the implications of VA loan closing costs is crucial when considering this type of loan. The VA funding fee, which varies depending on your down payment amount and how often you have utilized VA loans, can significantly influence your loan choice. It’s worth noting that disabled veterans, among others, might qualify for a funding fee waiver. Don’t hesitate to inquire if you’re uncertain about your eligibility for such waivers.

Thinking of Applying for a Joint VA Loan?

If you’re considering this path, you can initiate your mortgage application process online today with Elevation Mortgage.