Everything You Need to Know About Joint VA Loan Requirements

Buying a home is an exciting milestone in life. But for many, the road to homeownership can feel long and difficult, especially when it comes to securing financing. This is where VA loans come in. VA loans help eligible servicemembers and veterans purchase a home with little to no down payment. Even better, you can apply with a non-military co-borrower through a joint VA loan.

In this comprehensive guide, we’ll walk through all the key details on joint VA loans and requirements. Whether you’re a first-time homebuyer or looking to move up to a bigger place, read on to learn if a joint VA mortgage is right for you.

What is a Joint VA Loan?

A joint VA loan allows an eligible veteran or servicemember to apply for a mortgage with a co-borrower who is not their spouse The co-borrower does not need to have served in the military to qualify

With a joint VA loan, two or more borrowers are jointly liable for the mortgage. At least one borrower must be eligible for VA loan benefits. The property will be owned by all borrowers.

Joint VA loans offer veterans and servicemembers a chance to buy a home even if their income alone doesn’t qualify for the mortgage amount they need. Adding a co-borrower boosts total household income, which can increase buying power.

Spouses do not need to apply for a joint VA loan, even if only one spouse served in the military. Married applicants are treated as one entity. An unmarried couple can qualify for a joint VA mortgage as long as one person meets VA eligibility rules.

Key Benefits of Joint VA Loans

Joint VA loans provide several advantages to eligible borrowers:

• No down payment – Like a traditional VA loan, joint VA mortgages require no down payment. This helps buyers conserve cash.

• Relaxed guidelines – VA loans in general have more flexible credit and debt-to-income requirements than conventional mortgages. This helps more borrowers qualify.

• No mortgage insurance – Private mortgage insurance, required on conventional loans with less than 20% down, is not needed on VA loans. This provides cost savings.

• No occupancy requirement – The non-military co-borrower on a joint VA loan does not have to occupy the home. This provides flexibility.

• Larger loan amount – Combining incomes with a co-borrower may allow you to qualify for a bigger mortgage and buy a more expensive house.

Joint VA Loan Requirements

While joint VA loans offer nice perks, there are requirements borrowers must meet to qualify:

For Military Borrower:

• Served minimum active duty time
• Received honorable discharge
• Have VA home loan eligibility documented through Certificate of Eligibility (COE)
• Occupy home as primary residence

For Non-Military Co-Borrower:

• Have satisfactory credit score and history
• Provide income and asset documentation
• May need to make down payment on their portion of loan

For All Borrowers:

• Sufficient income to meet debt-to-income ratios
• Meet VA residual income guidelines
• Have enough cash reserves
• Pass VA appraisal on home

Let’s explore some of the key qualification criteria in more detail:

Credit Requirements

The VA does not have a minimum credit score requirement. But most lenders look for a FICO score of at least 580 to 620. The military borrower’s credit must be satisfactory. Income can offset weaker credit for the non-military co-borrower.

Debt-to-Income Ratios

Your total monthly debt payments, including the new mortgage, should not exceed 41% of gross monthly income. Some lenders adhere to a stricter 36% DTI. Total debt below 50% is needed to qualify for VA’s residual income guidelines.

Residual Income

Residual income equals your total monthly income minus all monthly debts. The VA wants to see enough residual income left each month to cover living expenses. Minimums vary by region and family size.

Cash Reserves

Most lenders require 1-2 months of mortgage payments saved as reserves. Some lenders may want reserves equivalent to 4-12 months of payments if you have weaker credit or income sources.

VA Appraisal

The home must pass a VA appraisal done by a VA-approved appraiser. This ensures the property is a sound investment and meets VA minimum property requirements.

Other Considerations

Closing costs, loan term, property type, loan purpose (purchase or refinance), and occupancy status all factor into loan approval. Your lender will guide you on specifics.

How Are Joint VA Loans Calculated?

When a military borrower applies for a joint VA loan with a non-military co-borrower, the VA guaranty and entitlement only apply to the veteran’s portion of the loan.

Here is how joint VA loans are calculated:

1. The total loan amount is divided by the number of borrowers.

2. The result is multiplied by the number of veteran borrowers using entitlement (usually one veteran).

3. The maximum VA guaranty is calculated on the portion assigned to the veteran in steps 1 and 2, based on VA’s guaranty table.

4. The lesser of the maximum guaranty or available entitlement is how much VA will guarantee.

5. The veteran’s entitlement is charged the amount VA guarantees on the loan.

Let’s see an example:

• Total Loan Amount: $300,000
• Borrowers: Veteran and Non-Veteran
• Veteran’s Available Entitlement: $36,000

1. $300,000 / 2 Borrowers = $150,000

2. $150,000 x 1 Veteran = $150,000

3. Maximum Potential Guaranty on $150,000 = $45,000

4. Lesser of $45,000 or $36,000 Entitlement = $36,000

5. Veteran’s entitlement charged $36,000

In this example, the VA would guarantee $36,000 or 25% of the total loan amount. The veteran’s entitlement would be charged the $36,000 guarantee.

Pros and Cons of Joint VA Loans

Joint VA loans offer nice advantages but also some potential drawbacks:

Pros

• No down payment requirement
• Relaxed underwriting guidelines
• May qualify for larger loan amount
• No mortgage insurance premiums

Cons

• Co-borrower may need down payment
• VA funding fee applies
• Co-borrower obligation for payments
• Possible challenges selling home later

Be sure to weigh the pros and cons before choosing a joint VA loan. Know the commitment and financial risk for any co-borrowers.

How To Apply for a Joint VA Mortgage

Ready to move forward with a joint VA loan? Here are the steps to take:

1. Choose a lender – Many lenders offer VA loans but shop around for the best rates and service.

2. Complete the application – You’ll provide personal details and financial information for all borrowers.

3. Gather documentation – Have pay stubs, tax returns, bank statements, VA Certificate of Eligibility, and any other required paperwork ready.

4. Get pre-approved – The lender will verify income, assets, credit, eligibility and give an initial loan approval.

5. Make an offer – Once pre-approved, you can confidently make an offer and have contingencies in place for financing.

6. Final underwriting – The lender will re-verify all information and issue final loan approval before closing.

7. Close on your home – At the closing appointment, you’ll sign loan documents to finalize the mortgage.

Get guidance from a loan officer early on to ensure a smooth process. Rates and loans vary, so shop multiple lenders to find your best option.

Key Takeaways on Joint VA Loans

Joint VA loans allow eligible servicemembers and veterans to buy a home with a non-military co-borrower. While requirements must be met, joint loans can help buyers qualify for a larger mortgage amount and buy their dream home.

Keep these main points in mind about joint VA loans:

• At least one borrower must qualify for VA loan benefits

• Occupancy requirements only apply to the military borrower

• Non-military borrower may need down payment

• VA only guarantees veteran’s share of the loan

• Underwriting considers income of all borrowers

• Shop lenders to find best rates and service

With the right VA lender, joint loans make owning your own home more accessible and affordable.