Can a Veteran get a VA Loan with a Non-Veteran?
There are plenty of situations where a veteran and a non-veteran might want to purchase a home together. For the purpose of this blog post, a non-veteran is someone who is not legally married to the veteran or considered a spouse under the law. Can vets and non-vets take out a VA loan together?
The Department of Veterans Affairs makes provisions for vets who want use their VA loan benefit to purchase a home with a civilian borrower. There are some restrictions — most of which apply to the veteran. For example, any veteran applying for a VA loan must certify they intend to use the property as the primary residence. The VA rules say any non-veteran (or a veteran who does not choose to use his or her VA loan entitlement on the loan) is exempt from the primary residence rule.
When it comes to qualifying for the loan, the VA rules on credit are stricter. According to the VA lender’s rulebook, the veterans’ credit “must be satisfactory and veteran’s income must be sufficient to repay that portion of the loan allocable to the veteran’s interest in the property.”
So far so good — the VA doesn’t expect the veteran borrower to be responsible for the other borrower’s interest in the property.
But, “…a different analysis applies to the portion of the loan allocable to the nonveteran. The credit of the nonveteran must be satisfactory. However, the combined income of both borrowers can be considered in evaluating repayment ability.”
The VA rules are designed to allow a veteran with “income strength” to compensate for any “income weakness” on the non-veteran’s part of the bargain. But the VA does not allow the non-veteran to offset financial “weakness” of the vet. The military borrower must be able to handle the financial burden of his or her portion of the VA loan.
The most important thing to remember about joint loans between a veteran borrower and a non-veteran co-borrower is that the military member’s VA loan benefit is limited to the veteran’s portion of the interest in the property. If a vet and non-vet split the loan 50/50, the VA loan guaranty covers the veteran’s 50%, not the full amount of the sale price.