Buy with a Non Vet Co-Borrower

Key Features of VA Joint Loans:

1. Who Can Be a Co-Borrower?

• A non-veteran who is not the spouse of the veteran.

• A veteran who is not using their entitlement.

• Two or more veterans, where one or more use their VA entitlement.

2. Guaranty Limitation:

• The VA will only guarantee the portion of the loan that corresponds to the VA-eligible veteran(s) using their entitlement. The remainder of the loan is not guaranteed by the VA and will need to meet the lender's requirements for non-guaranteed portions.

3. Down Payment Requirements:

• If the portion of the loan not guaranteed by the VA exceeds the VA loan limits (without a down payment), a down payment may be required. The lender typically calculates this to ensure the combined financing meets their guidelines.

4. Property Eligibility:

• The property being financed must still meet the VA's Minimum Property Requirements (MPRs), regardless of the loan being a joint loan.

Scenarios for VA Joint Loans

1. Veteran and Non-Veteran Co-Borrower (Non-Spouse):

• Example: A veteran applies for a loan with their sibling who is not a veteran. The VA will guarantee only the portion of the loan attributed to the veteran’s entitlement, and the non-veteran's share will require additional risk management (e.g., higher down payment).

2. Two Veterans, One Using Entitlement:

• Example: Two veterans are co-borrowers, but only one chooses to use their VA entitlement. The VA will guarantee only the portion of the loan associated with the entitled veteran.

3. Two Veterans, Both Using Entitlements:

• Example: Two veterans purchase a home together, and both use their VA entitlements. The VA guarantees the combined portion of the loan based on the entitlement usage of both borrowers.

Important Guidelines from the VA Lender’s Handbook (VA Pamphlet 26-7):

1. Definition of Joint Loans: "A joint loan is a loan made to:

• A veteran and one or more non-veterans (not spouse),

• A veteran and one or more veterans (not spouse) who will not be using their entitlement,

• A veteran and the veteran’s spouse who is also a veteran and both entitlements will be used."

2. Underwriting Standards:

• All borrowers must meet credit and income requirements set by the lender.

• If a non-veteran is involved, their financial qualifications must offset the portion of the loan that the VA cannot guarantee.

3. Down Payment Calculation:

• "For a joint loan where the veteran’s entitlement does not cover the entire loan amount, a down payment may be required to cover the portion of the loan exceeding VA coverage."

4. Appraisal Requirements:

• The property must meet the VA’s Minimum Property Requirements (MPRs) regardless of the joint loan structure.