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VA Loans and Co-Borrowers

Updated December 6, 2018

VA loans to individual borrowers are simpler than the requirements for VA loans to two or more borrowers. When two or more people are buying a property together, there are different VA rules which may apply in different situations. A military couple – where both spouses are veterans – has a different set of rules, for example, than those which cover underwriting a VA mortgage for two unmarried veterans.

This is because of credit underwriting requirements by the VA rather than any specific policy about who can purchase property with whom.

Credit and income factors are reviewed for each borrower. VA will only guaranty the military member's portion of any home loan between a vet and non-veteran. In addition, civilian co-borrowers must not have a disproportionate share of the financial burden on the VA mortgage. The veteran applicant is expected to have a more or less equal financial stake in the purchase of the property.

Co-borrowing is not the only area that gets a bit tricky when it comes to multiple borrowers investing in a home. What happens if a couple purchases a home with a VA loan, then experiences a divorce?

Legally, the couple and their lawyers must work out the details of ownership of the property, but for refinancing the home with a VA loan, a civilian, divorced spouse would not be automatically eligible. The military member is required to participate in any VA insured refinancing.

VA rules say, "The spouse cannot get an IRRRL unless the veteran agrees to be obligated on the new loan and commit his or her entitlement to the new loan. A person without entitlement cannot get an IRRRL or any other type of VA loan."

Any civilian co-borrower must seek conventional or FHA refinancing options; the Department of Veterans Affairs will only extend benefits to qualified military veterans. In these situations, if the veteran borrower agrees to use his or her benefits, there is no problem as long as all parties are otherwise qualified for the new loan.

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