Can I Have a Co-signer on a VA Loan?

Getting approved for a mortgage can be challenging, especially for first-time homebuyers. Many people wonder if having a co-signer on their VA loan application can help improve their chances. The short answer is yes – you can have a co-signer on a VA home loan. However, there are some specific requirements around who can co-sign and how it impacts your VA loan benefits. In this comprehensive guide, we’ll cover everything you need to know about co-signers and VA loans.

What is a Co-signer on a Mortgage Loan?

A co-signer, sometimes called a guarantor, is a person who agrees to be responsible for repaying a loan if the primary borrower defaults. The co-signer signs the mortgage paperwork and their name goes on the title.

Co-signers can be useful when the primary borrower has limited credit history, income, or assets. By adding the co-signer’s financial information to the application, it improves the debt-to-income ratios and provides additional assurance to the lender.

However, co-signing a loan is a big responsibility The co-signer is equally liable for making the monthly payments. If the primary borrower stops paying, the lender can pursue legal action against the co-signer for the remaining loan balance

VA Loan Co-Signer Requirements

The Department of Veterans Affairs does allow co-signers on VA loans. However, there are limitations compared to conventional loans.

On a conventional loan, you can generally have any trustworthy person with good credit co-sign your mortgage. But the VA has stricter co-signer eligibility guidelines:

• The co-signer must live in the home as their primary residence

• The co-signer must be your spouse OR a veteran/active duty service member themselves

The VA will not extend the same guaranty coverage when the co-signer does not meet these criteria. The 25% guaranty only applies to the veteran’s portion of the loan.

Without full VA backing, most lenders will require a down payment, often around 10-15%. So while it’s possible to have a non-spouse, non-veteran co-signer, you may lose your $0 down benefit.

Pros and Cons of a VA Loan Co-Signer

Co-signers can expand your homebuying options, but also present some drawbacks to consider.

Pros of Having a Co-Signer

• Strengthens your qualification – Adding their income and assets can help you meet VA debt-to-income guidelines or compensate for past credit issues.

• Allows lower credit scores – VA loans can be approved with scores as low as 580 with a co-signer that has good credit.

• Provides an alternative to a large down payment – Rather than save up 20% down to qualify, a co-signer lets you buy sooner.

• Offers reassurance to sellers – They may be more comfortable accepting your offer knowing someone else is guaranteeing the loan.

Cons of Having a Co-Signer

• Co-signer assumes responsibility – They are equally liable for the mortgage, including late fees and foreclosure.

• May still require down payment – If co-signer is not a spouse/veteran, you’ll likely need 10-15% down.

• Co-signer’s debts reduce buying power – Their own obligations count against the DTI ratio.

• Can make refinancing difficult – The co-signer would need to agree to be on the new loan.

As you can see, adding a co-signer has trade-offs. Make sure you fully discuss expectations and scenarios like missed payments or disaster forbearance before moving forward together.

Impact to VA Entitlement

Your VA home loan entitlement is the amount the VA can guarantee to the lender. This is usually 25% of the total loan amount.

When you have an eligible co-signer, the VA entitlement can be split proportionately between the two borrowers. For example:

• Veteran entitlement: $36,000
• Spouse entitlement: $36,000
• Loan amount: $300,000

In this case, the veteran’s portion of the $300,000 loan would be $150,000. So their entitlement covers 25% of their portion ($36,000). The spouse’s entitlement would cover the other 25% of their $150,000 share.

Because both borrowers are eligible for the guaranty, the 25% coverage can apply to the full loan amount. This allows the possibility of $0 down payment.

However, with an ineligible co-signer, the VA entitlement only applies to the veteran’s share of the loan. On a $300,000 purchase with a non-spouse co-signer, the veteran’s portion is $150,000. Their $36,000 entitlement only covers 25% of the $150,000.

Without VA coverage for the co-signer’s half, most lenders will require 10-15% down from the borrower’s own funds.

Common Co-Signer Scenarios

There are a few situations where co-signers commonly come into play on VA loans:

• Spouse has better credit – The veteran’s score may be too low to qualify on their own income.

• Veteran has high DTI ratio – Adding spouse’s income helps them meet the debt-to-income requirements.

• First-time homebuyer – Young veterans often need a cosigner to compensate for limited assets or credit history.

• Veteran spouse with previous entitlement use – Allows spouse to co-sign and add income rather than tap into additional entitlement.

• Unmarried or separated borrowers – Provides an alternative to needing a larger down payment on a joint loan.

As long as there is clear communication upfront and both parties are comfortable with the risks, co-signers can be an effective strategy for getting approved for a VA mortgage.

Alternatives to a Co-signer

Some options besides a co-signer for first-time homebuyers or borrowers with past credit issues include:

• Shop lenders to find the most lenient VA credit guidelines

• Make a larger down payment to offset risk

• Complete a rapid rescore to quickly improve your credit score

• Document extenuating circumstances for credit blemishes through a credit reconsideration process

• Build your credit and savings for 6-12 months to improve your mortgage eligibility

Applying for a VA Loan with a Co-Signer

If you determine a co-signer is the best approach for your situation, make sure you take these steps:

• Verify upfront that your selected lender allows non-spouse co-signers. Not all lenders permit this loan structure.

• Have the co-signer sign a gift letter if they are contributing any funds toward closing costs or the down payment.

• Check both borrowers’ credit reports and scores to understand your combined financial picture.

• Calculate your collective debt-to-income ratio to confirm you meet VA guidelines.

• Complete the full mortgage application together, with all required income, asset, and identity documents.

• Be prepared to make a larger down payment if your co-signer is not a spouse or veteran.

• Review loan disclosures together so you both understand the terms and co-signer implications.

FAQs About VA Loan Co-Signers

Can my boyfriend co-sign on my VA loan?

Yes, the VA does allow unmarried partners to co-sign. However, most lenders will require at least a 10% down payment when the co-signer is not a spouse.

What credit score does a VA co-signer need?

There is no specific credit score requirement for a VA co-signer. However, the better their credit, the higher your chances of approval. Many lenders look for VA co-signers to have at least a 620 FICO score.

Can my parents co-sign on my VA loan?

Parents are permitted as long as they will live in the home full-time. But unless they are veterans themselves, you’ll likely need 10-15% down when your parents co-sign a VA loan.

What debts does a VA co-signer need to include?

The VA looks at your collective debt picture. All monthly obligations for both co-signers must be counted, including mortgage payments, credit cards, auto loans, child support, and student loans.

Can I remove a co-signer from my VA loan later?

It depends. You typically need to refinance without the co-signer. This requires lender approval and your finances must be strong enough to qualify on your own.

Work With a VA Loan Expert

As you can see, VA loan co-signers involve some specific guidelines and calculations. Be sure to connect with an experienced VA lender who can walk you through the details