Mortgage loans available through the Department of Veterans Affairs are an excellent mortgage option for current active-duty and veteran service members, National Guard troops and the surviving spouses of service members. VA mortgage loans are backed by the United States federal government and offer an array of attractive benefits and mortgage options including no required down payment. While it’s easy to understand that you’ll qualify for a VA loan if both you and your spouse are service members, what if you are a service member and your spouse is a stay at home parent? Or if you are a veteran and you would like to purchase a home with your long-term girlfriend or boyfriend who is a civilian? If you are looking to qualify for a VA loan with a co-signor who is not eligible themselves for a VA loan, can you still obtain a VA mortgage loan together?
Co-signors or co-borrowers are people who agree to buy property with you – and agree to be responsible for the mortgage each month and/or any default on the mortgage. Many homebuyers need or want a co-signor: co-signors can leverage each other’s credit score and income in order to qualify for a home at all or to qualify for a larger or more expensive home.
The legally married spouse of a military service member or veteran can co-sign on a VA loan with no penalty and with no additional red tape, restrictions or requirements. In these cases the VA loans will still be 100% guaranteed and backed by the federal government.
When two unmarried people co-sign onto a VA mortgage loan and only one is an eligible individual (i.e., a service member, veteran or the surviving spouse of a veteran), the VA loan guarantee will be limited to the amount of only the eligible individual’s interest in the home.
The downside of these loans, and the fact that the federal government will only back a percentage of the loan rather than backing the entire loan, is that you will most likely be required to put down a down payment on your “mixed-eligibility” VA mortgage loan even though down payments are not required under traditional VA loans. Putting down cash, perhaps as much as 12% or more of the value or sale price of the home helps the lender to balance out the risk they are taking on writing a mortgage loan that’s not fully backed by the Department of Veterans Affairs.
Some VA lenders will not process or allow these types of mixed-eligibility mortgage loans, so you’ll want to call around to experienced VA lenders if this is the situation you and your prospective co-signor are in.
VA loans offer many advantages and benefits that are not offered on FHA loans or conventional mortgage loans. An experienced VA lender can help get you onto the road to home ownership today!