Sometimes a VA loan involves two or more borrowers. Depending on the circumstances, this may be referred to as a joint loan, which has a few additional requirements that must be observed during the application process.
The rules for VA joint loans don't apply when a married couple want to take out a VA mortgage together. In such cases, the spouse is treated the same as the primary borrower. This is true in cases where both spouses are obligated on the VA mortgage.
So what is a VA joint loan? VA Pamphlet 26-7 refers to a joint loan as situation where:
• a veteran and another person(s) are liable, and
• the veteran and the other obligor(s) own the security.
Chapter Seven of the VA Lender's Handbook states that a VA joint loan can be made out 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.
The VA is quick to point out that, "A loan to a veteran and fiancé who intend to marry prior to loan closing and take title as veteran and spouse will be treated as a loan to a veteran and spouse (conditioned upon their marriage), and not a joint loan."
Note the phrase "conditioned upon their marriage". The legal status of the couple is the key in determining the nature of the loan. If the legal status is going to be changed from single to married, the above statement applies.
Those who don't have plans with definite dates for their legal status to change may have difficulty securing a VA loan under the "conditioned upon their marriage" clause until there is a definite date when that legal status is due to change.
VA joint loans require both parties to qualify for the loan--the credit shortcomings of one applicant cannot be offset by the other applicant. The veteran must be equally obligated on the loan and there may be other requirements depending on the status of the other borrower(s).
Speak to a loan officer about the specifics of your circumstances to see what rules may apply.
Do you have questions about VA home loans? Ask us in the comments section.
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