Joint VA Loan: What Is It And How Does It Work?

Buying a home often comes with major hurdles, such as a down payment and interest rates that add thousands of dollars to your loan costs. Thankfully, certain military members and veterans have the opportunity to buy a home with relatively low interest rates and no down payment using a VA loan.

If you’re buying a home with a partner and that person isn’t a military member or veteran, you won’t have to worry. You can qualify for a joint VA loan if only one of the borrowers meets the requirements.

What Is A Joint VA Home Loan?

A VA loan is a type of mortgage that is backed by the Department of Veterans Affairs. These loans help make homeownership more affordable and accessible, helping borrowers buy, build, improve or refinance a home with no down payment.

A VA loan is a nonconforming loan, meaning it doesn’t necessarily have to meet the lending requirements set by Fannie Mae and Freddie Mac.

A joint loan is a VA loan that allows two or more borrowers who are not married to each other to enjoy the benefits of a VA loan. To qualify for a joint VA loan, only one of the borrowers must meet the requirements for a VA loan.

Who Can Get A Joint VA Loan?

To meet the requirements for a VA loan, a current service member must have served at least 90 continuous days. For veterans, the length of service depends on the time period during which they served. For veterans who served in the 1980s or later, the requirement is generally at least 24 continuous months or the full period for which they were called or ordered to active duty.

There are certain exceptions to these eligibility requirements, including veterans who were discharged due to hardship, reduction in force, medical conditions or service-connected disabilities.

As we mentioned, two or more people are eligible for a joint VA loan if at least one of the borrowers meets the requirements. Some examples of borrowers who may qualify for VA loans include:

• A veteran with one or more non-spouse, non-veteran co-borrowers
• Two or more non-spouse veterans where only one will use their entitlement
• Two or more spouse or non-spouse veterans where all will use their entitlement

A joint VA loan doesn’t require the two borrowers to be married, which means an eligible veteran or service member could buy a house with a friend using a VA loan. A VA loan to a veteran and spouse is only considered a joint loan if both are veterans and both will use their entitlement.  Additionally, a surviving spouse can be eligible for a VA loan if the veteran is missing in action, is a prisoner of war, died in service or was completely disabled before their death.

How Do Joint VA Loans Differ From Other VA Loans?

When two or more parties apply for a VA loan, the approval process is a bit different from the process for any other VA loan (or even from two or more parties applying for a conventional loan).

As with other joint loans, the lender will consider the credit and income of both the veteran and non-veteran applying for the loan. Both parties must have satisfactory credit to qualify for the loan. However, only the veteran’s income must be satisfactory to qualify.

For example, if the veteran had a satisfactory income and the non-veteran didn’t, the pair could still qualify for the loan. The income of the veteran could compensate for the low income – or lack of income – of the other borrower.

However, the situation doesn’t work in reverse. The veteran’s income must be satisfactory to repay the entire loan, and if it isn’t, the income of the non-veteran can’t be used to make up for it.

Another important difference between joint VA loans and individual VA loans is that when unmarried co-borrowers apply, the Department of Veterans Affairs guarantee only extends to the veteran borrower. As a result, the non-spouse non-veteran may be required to make a down payment on their portion of the loan amount.

When Are Joint VA Loans Beneficial To Use?

There are many situations where a joint VA loan would be more beneficial than either an individual VA loan or a joint conventional loan.

• When one partner is an eligible veteran or service member: VA loans come with some key benefits, including competitive interest rates and no down payment. As a result, they’re worth considering any time one of the borrowers is eligible.
• You won’t have to pay a down payment: While down payments aren’t required for most VA loans, they may be for some joint VA loans. However, if you aren’t required to provide a down payment, a joint VA loan is an excellent choice.
• When there are income limitations: A joint VA loan, like other VA loans, takes into consideration the income of both borrowers. Therefore, you may qualify for a higher loan amount than if one borrower applied for an individual loan.
• When you have a low credit score: Unlike conventional loans, VA loans aren’t subject to specific credit requirements. Each lender can set their own minimum credit score and some may allow for a lower credit score than they could with a conventional loan.
• When there are VA entitlement limitations: A joint VA loan can be helpful if two eligible veterans or service members are applying together and one has already used their entitlement limitation.

Pros And Cons Of A Joint VA Loan

Joint VA loans have some key benefits but also have some downsides worth considering. It’s important to weigh the pros and cons before applying for a loan.

Pros

Here are some of the major benefits of a joint VA loan:

• Larger loan amount: A joint loan will likely allow you to qualify for a larger loan amount than you could with an individual loan.
• Ability to add a co-borrower: Adding a co-borrower allows you to share in the repayment, as well as have someone else’s income and credit score on the application.
• Better mortgage rates: VA loans, including joint loans, have competitive interest rates that often beat out those available for conventional loans.
• No mortgage insurance: Unlike other types of home loans, VA loans don’t require mortgage insurance when you don’t have a 20% down payment.
• No down payment: One of the greatest benefits of VA loans is the lack of a down payment, which can remove a major hurdle to homeownership.

Cons

Here are some of the disadvantages of VA loans:

• Down payment implications: In some cases, a down payment may be required on a joint VA loan if the co-borrowers are unmarried and one isn’t an eligible veteran.
• VA funding fee: VA loans have VA funding fees in addition to other closing costs. The funding fee ranges from 1.25% to 3.3% depending on your down payment and whether it’s your first time using a VA loan.

How To Complete A Joint VA Loan Application

A joint VA loan allows you to purchase a home with a spouse, unmarried partner, friend or someone else. Here’s how to get started:

1. Obtain Your Certificate Of Eligibility

To get a VA loan, you’ll need a Certificate of Eligibility (COE). You can request a COE either in writing or through your lender, who can look it up using an online database. You will need a copy of either your discharge papers or a statement of service to obtain your COE.

2. Know The Joint VA Loan Requirements

Like conventional loans, joint VA loans have certain eligibility requirements to qualify, though they may vary slightly from lender to lender. Here are the general requirements for a joint VA loan:

• Credit score: The VA doesn’t have a specific credit score requirement for their loans. But typically, lenders want to see a credit score of 580 or higher for all borrowers.
• DTI ratio: Your debt-to-income ratio (DTI) is the percentage of your income that goes toward debt. VA loans have flexible DTI requirements. In general, an applicant needs to have a DTI of 41% or less to qualify.
• Entitlement: Eligible borrowers are only allotted a certain VA loan entitlement. If you’ve never used a VA loan before, you’ll likely have full entitlement, but that may not be the case if you have used a VA loan before.
• Occupancy: Joint VA loans are subject to occupancy requirements. The Veteran borrower must certify that they plan to personally occupy the home.

3. Research Your VA Funding Fee

As we mentioned, VA loans are subject to a funding fee at the time of closing. The chart below shows the funding fee required for VA loans:

There are some situations where a funding fee can be waived. For example, you won’t be subject to a funding fee if you have a service-connected disability, if you’re a surviving spouse who receives certain benefits or are an active-duty service member who has a Purple Heart.

4. Gather Financial Documents

Whenever you’re applying for a mortgage, regardless of whether it’s a joint VA loan or any other kind, you’ll have to provide various types of documents. Required financial documents for mortgage preapproval include:

• Personal identification
• Recent pay stubs
• W-2 or 1099 forms
• Proof of assets and debts
• Rental history

5. Apply With An Approved Mortgage Lender

Once you’ve gathered everything you’ll need and have verified that you’re eligible for a VA loan, it’s time to complete your application. You can apply with any VA-approved mortgage lender. Consider getting preapproved with multiple lenders to shop around for the best rate.

Is A Joint VA Loan Right For You?

A joint VA loan can be a great option for anyone who qualifies. VA loans have many benefits, including competitive interest rates, no down payments and no mortgage insurance. If you and your co-borrower qualify for no down payment, a joint VA loan is likely to be more affordable than any other type of mortgage.

However, there are situations in which a joint VA loan might not be the right choice. For example, you may want to consider an alternative loan type if the non-veteran borrower has a higher income. In that case, you could probably qualify for a larger loan amount with a conventional loan.

FAQs On Joint VA Loans

A joint VA loan has plenty of benefits, but like any other type of loan, it’s important to do your research before you apply. The following are answers to some frequently asked questions about joint VA loans.

Can an unmarried couple apply for a joint VA loan?

Yes, an unmarried couple can apply for a joint VA loan. In fact, you could apply for a joint VA loan with a friend or another family member. However, if the two applicants aren’t married and only one is an eligible veteran, you may be required to pay a down payment.

Can a noncitizen be on a joint VA loan?

There’s no citizenship required to qualify for a joint VA loan. You must only meet the service requirements set by the Department of Veterans Affairs and have lawful residence status in the country.

What down payment is typically required for a joint VA loan?

In most cases, VA loans don’t require a down payment. However, a down payment may be required for a portion of the loan if the co-borrowers aren’t married and one isn’t an eligible veteran or service member.

The Bottom Line: Non-Military Borrowers Can Help You Finance A Home With A Joint VA Loan

A joint VA loan is one option for borrowers with the appropriate military service who want to buy a home with a spouse, friend or family member. Before you decide to apply for a joint VA loan, it’s important to sort out the logistics of homeownership and buying a home with another person.

If you’re ready to apply for your loan, start the approval process with Rocket Mortgage^® today.