VA Loan Rules: Loans Between Veterans and Non-Veterans
One of the most common questions about VA home loans is whether a veteran can get a VA loan with a non-veteran borrower. In situations where someone eligible for a VA insured home loan wants to apply for a mortgage loan with a non-veteran, the VA loan program identifies this as a “joint loan” and there are special rules that cover such circumstances.
Before we examine the VA rules for joint loans, it’s important to note that joint loans are not the same as VA loans where a military member and spouse apply together. In cases where a veteran and spouse apply, both parties are given equal consideration under the VA loan and the full amount of guaranty is available for the mortgage (assuming the military member is using his or her full VA loan guaranty.)
VA loan rules for joint loans are found in VA Pamphlet 26-7, Chapter Seven, which says:
“Joint loan” generally refers to a loan for which:
- a veteran and another person(s) are liable, and
- the veteran and the other obligor(s) own the security.
A joint loan is a loan made to:
- the veteran and one or more nonveterans (not spouse),
- the veteran and one or more veterans (not spouse) who will not be using their entitlement,
- the veteran and the veteran’s spouse who is also a veteran, and both entitlements will be used, or
- the veteran and one or more other veterans (not spouse), all of who will use their entitlement.”
As mentioned above, any VA loan involving a veteran and his or her spouse will not be treated as a joint loan if the spouse is not a veteran. There is also no need to apply for a joint loan in cases where the spouse is a veteran who will not be using his or her entitlement for the VA mortgage.
But what about other situations? VA loan rules specifically address “A loan to a veteran and fiancé who intend to marry prior to loan closing and take title as veteran and spouse”. In such cases the couple, “will be treated as a loan to a veteran and spouse (conditioned upon their marriage), and not a joint loan.”
VA joint loans are different because in cases where a non-veteran who is not the spouse applies with the VA borrower for a VA mortgage, the VA only insures the veteran’s portion of the loan. From Chapter Seven:
“Guaranty is limited to that portion of the loan allocable to the veteran’s interest in the property.” For more information on how joint loans work, speak to a loan officer or contact the VA directly.
Do you have questions about VA home loans? Ask us in the comments section.