VA Loan Questions: The VA Joint Loan
We get plenty of reader questions about VA loans. One common source of confusion over the VA loan benefit involves situations where an eligible veteran wants to apply for a loan with another veteran or a non-veteran who is not eligible for a VA loan. What do VA loan rules say about these situations?
To begin, the Department of Veterans Affairs distinguishes between a loan application filled out by a veteran and spouse and all other applications signed by more than one person. For VA loans, the spouse is treated the same as the veteran. No other VA loan situation is quite like this. When a veteran applies with another borrower who does not have VA loan eligibility and is not a spouse, different rules apply.
“Veteran and spouse” VA loans are not considered joint loans. VA Pamphlet 26-7 describes a joint loan as follows:
“Veteran/nonveteran joint loan: Common meaning: A loan involving one veteran and one nonveteran (not spouse).
For purposes of applying the principles explained in this section, this term will also be used to represent any other type of joint loan involving at least one veteran using his or her entitlement and at least one other person not using entitlement (can be a veteran or nonveteran, but not a spouse).
- Three veterans using entitlement and one nonveteran.
- One veteran using entitlement and four nonveterans.
- Two veterans using entitlement and two veterans not using entitlement.”
VA loan rules describe a joint loan between to eligible veterans as, a “two veteran joint loan”. This involves two veterans who are not married to each other who will both use their VA loan benefit to purchase a home together. According to VA Pamphlet 26-7, “It can include loans to:
- The veteran and the veteran’s spouse who is also a veteran, if both entitlements will be used, or
- Three, four, or more veterans, all of whom will use their entitlement.”
Non-veterans can apply for a VA loan with a veteran, but two important details apply. One, VA loan rules state, “Guaranty is limited to that portion of the loan allocable to the veteran’s interest in the property.” Two, VA loan rules say,”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. In other words:
- Income strength of the veteran may compensate for income weakness of the nonveteran, but
- Income strength of the nonveteran cannot compensate for income weakness of the veteran in analyzing the veteran’s ability to repay his or her allocable portion of the loan.”
VA loans are normally for one-to-four unit properties, but the rules are slightly different for joint loans. VA Pamphlet 26-7 says, “If a property is to be owned by two or more eligible veterans, it may consist of four family units and one business unit, plus one additional unit for each veteran participating in the ownership.”
Do you have questions about VA home loans? Ask us in the comments section.