For veterans and active-duty service members, the U.S. Department of Veterans Affairs offers plenty of loan options for buying a home. VA home loan programs typically benefit users with more lenient application requirements and favorable terms.
Some VA-eligible borrowers might experience difficulty qualifying for a loan if they are still unable to meet the more lenient criteria offered by VA-backed loans. In that case, potential homeowners may want to have another party co-sign on a loan to qualify. Let’s take a look at the eligibility criteria for getting a co-signer on a loan and when it is appropriate to consider.
Why Get a Co-Signer on a VA Loan?
Getting approval for a VA loan can be broken down into two categories. The veteran or active-duty service member must meet the requirements set by the VA. This will include getting a Certificate of Eligibility (COE), in addition to meeting the specified service requirements. VA-loan recipients must also meet the requirements set by their lenders. Your credit card score and debt-to-income (DTI) ratio will be determining factors in the final decision to issue a VA loan.
Whether it’s due to a low credit score, a less than ideal DTI, or other financial flaws, a VA-lender may require a co-signer on a loan if the primary loan borrower seems too financially risky based on their income and credit history. Your lender may decide they want a co-signer on the loan to ensure the mortgage will be repaid regardless of your financial circumstance. A co-signer should be in a better position financially, with records that demonstrate their ability to qualify for a loan. So, don’t choose your uncle Ferdinand who lives by the docks and hasn’t seen a paystub since 1973.
What Are the VA Loan Co-signer Eligibility Requirements?
As mentioned earlier, a co-signer will need to qualify under the criteria set by the VA as well as the lender. Additionally, a co-signer on a VA loan must meet the following eligibility requirements:
- This person must occupy the home with you (the primary loan borrower)
- This person must be your spouse, or
- This person must be eligible to receive a VA loan, so a veteran or active-duty service member
Entering into this loan agreement with a co-signer should not be taken lightly. Like the primary loan borrower, a co-signer’s credit and other financial records will be negatively impacted if the VA loan goes into default.
How Is a VA Loan Co-Signer Different from A VA Loan Co-Borrower?
Another option for veterans having difficulty qualifying for a VA loan on their own may be getting a co-borrower instead of a co-signer on the loan. A co-borrower, or co-applicant, is someone who applies and shares liability for repayment of a loan with another borrower. The co-borrower is not only partially responsible for the mortgage payments, but they are also able to share in the benefits of homeownership as well (like built-in home equity).
Co-borrower requirements are set by the lender. As with a co-signer, the co-borrower can either be a veteran’s spouse, another veteran, or an active-duty military borrower. Once approved under a joint loan, the co-borrower is also added to the title. Both borrowers have ownership of the loan proceeds and are equally responsible for repaying the balance. Lenders tend to like joint loans because they are less risky since there are two sources of collateral or income.
How Can The Home Loan Expert Help?
Hero Loan, The Home Loan Expert’s VA Loan Program. We are proud to offer each of our clients a personalized lending experience through our friendly loan officers. Our face-to-face approach to customer service ensures that the needs of active-duty military and veteran homebuyers and homeowners are addressed with the utmost care, consideration, and respect. As part of our mission to serve our heroes, we support the generous efforts of the Fisher House Foundation, which builds comfortable homes where military and veteran families can stay free of charge, while a loved one is in the hospital.
Our streamlined services allow for underwriting and other paperwork-heavy processes to be completed in house. This means you will spend less time worrying about the hassle of filling out paperwork. We can get you approved for a loan in just five minutes and into your dream home quicker, with closing periods in as little as 14 days.
Seeking a loan on a new home can be a daunting experience. Let us walk you through the co-signing process or answer any questions you may have. Give us a call at 800-991-6494 to speak with a VA loan representative, or reach out to an available lending expert through our application. We will be more than happy to address any of your inquiries or concerns!
Chris
