Having a co-signer can help Veterans qualify for a VA loan, and having a co-borrower can help Veterans afford the monthly payments on a home loan. However, there are rules about who is eligible to be a co-signer or co-borrower.
Co-signers are individuals who guarantee a home loan but don’t have ownership over the property. If the homeowner defaults on the debt, the lender will hold both the homeowner and the co-signer responsible.
VA loan co-signers are used to help homebuyers qualify for a loan when their personal finances are not strong enough to meet the requirements for a loan. For example, if your credit score isn’t high enough to qualify for a VA loan, you can get a co-signer with a higher credit score to guarantee your loan so that your application can be approved.
Yes, the VA allows Veterans to have co-signers for their VA loans. To receive the maximum benefits of your VA loan, your co-signer should be your spouse or an eligible Veteran who also lives in the home.
A VA loan co-signer should only be considered if they have good credit and strong finances. A co-signer with a poor credit score or weak financials could cause your VA loan application to be denied.
To determine co-signer eligibility for a VA loan, lenders consider the following factors:
The stronger your co-signer’s financials are, the more likely you are to qualify for your VA loan.
Unlike co-signers, who don’t have any ownership interest in the property, co-borrowers share ownership of the property with the Veteran. Your co-borrower has the same ownership rights and debt payment responsibilities as you.
As with co-signing, your co-borrower should be your spouse or an eligible Veteran who also lives in the home if you want to get the most out of your VA loan benefits.
Technically, anyone can be a co-signer or co-borrower on a VA loan, as long as they live in the same home as the Veteran borrower. But if your co-signer or co-borrower is not your spouse or an eligible Veteran, you may need to meet additional requirements to secure your VA loan.
The VA allows for non-spouse/non-Veteran co-signers and co-borrowers, but in these cases, the VA will not fully guarantee the loan. They will only guarantee the eligible Veteran’s portion of the loan. This means the lender has to accept more risk to approve your VA loan application. If you default on your loan, the VA will only cover the lender for your share of the debt, not your co-borrower or co-signer’s share.
Your lender may choose to approve your loan application with a non-spouse, non-Veteran co-signer or co-borrower in a joint VA loan. But because of the higher risk, the lender will likely require a down payment.
Standard VA loans, in which all borrowers are qualified Veterans or spouses, can be offered with 0% down because the VA guarantees 25% of the loan, leaving the lender to assume the risk for the other 75% of the loan. This is acceptable to the lender because they regularly assume up to 80% of the risk for non-Veteran buyers who put 20% down.
But if a Veteran applies for a VA loan with a non-spouse or non Veteran, the VA will only guarantee the Veteran’s half (so 12.5% of the total loan amount). This means the lender will likely require a down payment of 12.5% which, when combined with the VA’s 12.5% guarantee, keeps the lender’s exposure at 75%.
The amount of money the VA will repay the lender if a borrower defaults on their loan is called an “entitlement.” Each qualified Veteran is eligible for an entitlement. If your co-borrower also has an entitlement, you have the option to either combine them (in which each Veteran uses a portion of their entitlement) or to fully utilize one Veteran’s entitlement, leaving the other untouched. Combining entitlements is called “dual entitlement.”
Learn more about VA loan dual entitlement options for military couples.
The VA allows non-spouse co-borrowers or co-signers, but many lenders do not. If you find a lender who allows your girlfriend or boyfriend on your VA loan, you will likely need a down payment of at least 12.5% to secure the loan.
As is the case with non-military boyfriends and girlfriends, a non-Veteran VA loan co-signer parent is allowed by the VA, but many lenders choose not to allow a non-Veteran parent to co-sign a VA loan.
Eligible Veterans and their spouses can be on the title of a VA loan. If you want a non-spouse, non-Veteran resident of the house to be on the title, you will need to find a lender who accommodates this type of joint VA loan. And that lender will likely require a down payment of at least 12.5% to cover the portion of the loan that the VA will not guarantee.
Ultimately, co-signers can help you get approved for a VA loan, but only if they have solid financials and a clean credit history. Co-borrowers can share in the responsibility for repaying your VA loan, but will need to meet the same minimum guidelines as other VA borrowers. In each case, qualifying for a VA loan will be easier if your co-signer or co-borrower is a spouse or an eligible Veteran. But it can be possible to qualify for a VA loan with a non-spouse, non-Veteran if you're willing to do a little extra work and can come up with a larger down payment.
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† ICB Solutions is a division of Neighbors Bank, which is an affiliate of Mortgage Research Center, LLC dba Veterans United Home Loans.