Having a co-signer on a loan can be incredibly handy and useful for getting a bigger loan and lower interest rates. This is true not only for traditional loans, but for VA loans as well. If you are considering getting a joint loan, you can use your spouse, another veteran, or a non-veteran to co-sign. Of course there are some rules and stipulations that come with each type of co-signer.
Spouse
If you are planning on a joint loan with your spouse, they will be covered under the entire VA loan. The VA guidelines recognize legally married spouses of veterans as co-signors on VA loans and can include their income and credit to qualify for the loan. This type of joint loan can be fully guaranteed by the VA.
Veteran
For a co-signer who is another eligible veteran, the VA will issue a joint loan that covers both borrowers. In this case, the VA will divide the entitlement charge equally between the veterans.
Non-veteran
If your co-signer is non-military and not your spouse, they are still allowed to be a on the joint loan, but they won’t be covered under the VA guaranty. If you default or go into foreclosure, the non-military co-signer won’t be protected for their half of the loan.
This can cause problems with some banks that may be unwilling to lend to a co-borrower who is not insured. The best thing to do is talk with your loan officer to see what type of arrangement can be made.
For example, a bank may be willing to issue the joint loan as long as you both put an initial down payment on the part that is not covered under the VA. You will also need to file a joint loan with the VA before you can obtain the loan for your house.
Remember that buying a house with someone is a huge commitment, so take the time beforehand to make sure your co-signer has good credit, solid income, and will be able to pay their portion in the future. It’s a good idea to verify these issues months in advance, that way you can make sure all credit problems are dealt with before you start the loan process.
Once you have decided to go ahead and apply for a joint loan, sit down with your loan officer to ask questions, discuss the details about applying, and find out what paperwork needs to be completed by your co-borrower.