What are the VA Loan Co-signer Requirements?

va loan co-signer requirements

Va loan co-signer requirements. If you have good credit, there is a good chance that someone will call you and ask for you to co-sign a new loan. Before you agree to be their co-sign, you need to know what a co-sign means in a loan program. 

Co-signers may face significant repercussions if the primary borrower cannot make a payment. Having a co-signer on the loan, regardless of how high their credit score, would not matter much to the bank or the lenders. The bank or the lenders knows that they can go after co-signers for overdue payment, it is the second signature that made the difference in the loan approval process. Borrowers may ask for someone to co-sign a loan due to low credit scores, lack of credit history, or because their loan is offered with a high-interest rate. A co-signer on a loan term is legally responsible for the debt if the primary borrower defaults on the loan payments. Co-signing a loan will show up on your credit report history and may impact your credit score if the primary borrower pays late or defaults. As a co-signer, for you to be eligible for a loan, you also need to have a strong credit score. You have to make sure that you are capable to pay off the debt if the borrower defaults. If you had to assume the payments for this loan and it would hurt you financially, you probably should not co-sign the loan. You also need to understand the terms fully before agreeing to be a co-sign. Sometimes the responsibility for a co-signer varies and it depends on the lenders, you may want to take note of when you will be contacted or what you will be responsible for paying. 

On the VA loans, some lenders obligate you for a co-signer to make the loan happen. While some lenders might not allow a loan with a co-signer in their program. You need to make sure that if you need a co-signer for a loan, there are some requirements for it to be approved in a loan. A co-signer can help in the income department, more income is better and two borrowers have a greater potential to stay solvent in a mortgage. 

You should know that two or more veterans may apply for a VA mortgage together as co-signers. In such cases, the VA will calculate the borrower’s entitlement, now, if you have not made a purchase with a VA loan, your entitlement will still have their 100% VA loan entitlement to be used.

A veteran and spouse, even a spouse who is a civilian, may apply for a VA home loan together but technically speaking, this is not considered co-signing. The VA loan program views a legally married couple buying a home as a different thing entirely than two military members or veterans applying for a loan together or a civilian who is not a spouse applying with a veteran. va loan co-signer requirements

The first thing you need to know if you want to have a co-signer for a VA mortgage is the Department of Veterans Affairs permits a co-signer, but VA does not guarantee the non-veteran/non-military member’s portion of the loan. This means, only the veteran’s portion of the loan may be guaranteed by the VA. In other words, a civilian or someone with no VA mortgage loan entitlement cannot have their half or portion of the loan as a VA mortgage. If you intend to do a dual entitlement where both you as a borrower and another person, commonly used between spouses, is to use a co-borrower method. The difference is the co-borrower will have an ownership interest in the property and works with you to make the payment of your VA loan. Co-borrowing on a VA loan with another VA-eligible veteran or spouse can keep down payments out of the picture. But, it is important for both of you to know how to split up the entitlements. Dual entitlement gives the borrowers the option of each using some of their entitlement or having the primary to use only their entitlement. Between veteran co-borrowers, a single borrower can use all their VA loan entitlement, or the veterans can share the entitlement between them depending on their preferences. You need to remember, however, the other veteran will need to intend to occupy the home as their primary residence. va loan co-signer requirements

The second thing you need to know is that your participating lender may or may not permit a co-signer in this context. When talking to your loan officer about the option to apply for a home loan with a non-VA borrower, be sure to use the term “joint loan” or “joint VA loan”. Most VA lenders know these terms and will immediately understand what you are trying to do and advise you accordingly. The loans offered as joint VA loans will require a down payment for the non-veteran applicant. Zero down payments options are only for the veteran or borrower with VA loan entitlement.

You already know that using a co-signer will have their credit report and score to be reviewed as been stated above. If there is a situation where the co-signer has already co-signed on someone else’s loan and the situation is not good, the co-signer had financial liabilities as a result of this. Other issues can include debt-to-income ratios that are too high or exceed 41% of the minimum score from most lenders, made the co-signer has had late or missed payments on any financial obligation.

Now, with this knowledge, you need to consider whether you need a co-signer for your VA loan program or not. There are some pros about having a co-signer in a VA loan such as dual entitlement and will form a strong financial together as one in a loan program. But, you also need to remember that between the primary borrower and a co-signer, both parties should have a good credit score. If either the primary borrower or a co-signer has a low credit score, it will be harder for the loan to be approved. 

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