Joint VA loan: What it is and how to apply

The VA loan, insured by the Department of Veterans Affairs (VA), is one of the most attractive mortgage options available. That’s because no down payment or mortgage insurance is required – plus, you’re eligible for a lower interest rate. Problem is, not everyone qualifies.

But the good news is that you can try applying for a joint VA loan, which means having a VA mortgage, with more than one borrower. One of the borrowers must be a military member, veteran, or eligible surviving spouse, but the other person does not.

It’s natural to wonder: How do joint VA loans work? What are the pros, cons, and requirements? How does VA entitlement factor in? What’s involved with applying? And, for that matter, can I get a VA loan if my dad served? Keep reading to find out the answers to these and other key questions about joint VA loans.

What is a joint VA loan?

A joint VA loan is a mortgage in which loan responsibility is shared by two or more co-borrowers. At least one of the borrowers must be an active member or veteran of the U.S. military or an eligible surviving spouse.

“For instance, if two friends from the military want to take out a mortgage loan together, they could consider a joint VA mortgage,” says Dennis Shirshikov, a professor of finance and economics at City University of New York/Queens College.

All borrowers who apply for a VA loan together are responsible for the monthly mortgage payments of this government-insured loan.

Joint VA loans vs. other VA loans

The big difference between a joint VA loan and a traditional VA home loan depends on the combination of applicants for the loan. If a veteran or active-duty military member is applying with an unmarried, nonmilitary borrower, the latter may need to make a down payment on the portion of the loan that isn’t insured by the Department of Veterans Affairs.

Remember: The VA only guarantees the portion of the loan that’s covered by the borrower who qualifies for VA benefits. This increases the risk of the overall loan. That’s why the lender may ask for a down payment from the borrower who doesn’t qualify for VA loan benefits or isn’t using their VA loan benefits.

Why are joint VA loans beneficial?

Joint VA loans are a good option for qualified applicants who don’t want to make a down payment. As long as one of the borrowers has qualifying military service or is a surviving spouse of a veteran, no money down is necessary for their part of a joint VA loan. (However, as covered earlier, the nonmilitary co-borrower may be required to make a down payment on their portion of the loan.)

“The joint VA loan structure opens the door to homeownership for many veterans across the country who want to buy a home with someone they trust, like a partner, parent, friend, or adult child, even if they’re not married,” explains U.S. Air Force veteran John Reuter, a REALTOR® and founder of Integrity Homes who specializes in VA loans and helping VA-eligible buyers in Wisconsin.

That’s because lenders can use the income of all applicants when determining whether to approve or reject an application for a joint VA loan.

VA loans are also attractive because they are nonconforming loans, meaning it doesn't meet the standards set by the government-sponsored enterprises: Freddie Mac and Fannie Mae. Because the government partially insures every VA loan, lenders assume less risk and can be more relaxed with their loan requirements because they’re protected from losses if a borrower defaults on their loan. The government’s guarantee to loan investors is why you don't need a down payment for a VA loan and why you may qualify for a VA loan with a lower FICO^® credit score.

Who can get a joint VA loan?

If you’re applying with your spouse, you don’t need to apply for a joint VA loan; instead, you’d apply for a traditional VA loan. Married couples are counted as one entity for VA loans, even if only one applicant has qualifying military service. Each spouse will be responsible for repaying the VA loan, and spouses can choose to count both their incomes when applying.

With a joint VA loan, two or more borrowers – at least one VA-approved borrower and one nonmilitary borrower – apply for one VA loan. As mentioned, because it is a joint loan, all borrowers are responsible for the monthly mortgage payments.

A joint VA loan works for three common types of borrower scenarios:

• One borrower qualifies for a VA loan and applies with one or more borrowers who don’t.
• Two or more borrowers qualify for a VA loan, and all the applicants use their VA entitlement.
• Two or more borrowers qualify for a VA loan, but not all applicants use their VA entitlement.

Other joint VA loan requirements

VA loans have other requirements to consider, including:

• Primary residence rules: At least one of the borrowers – the VA-eligible borrower – must reside in the purchased home as their primary residence. “Co-borrower occupancy is not required by the VA, but many participating lenders will require this,” adds Reuter.
• Creditworthiness: VA loans require no official minimum credit score. But participating lenders often seek a minimum score of 620.
• DTI ratio: Your debt-to-income ratio should be 41% or less, but higher ratios can be approved if you have strong residual income.
• Employment history: The VA doesn’t require a specific employment period, but it looks for stable and reliable earnings. “Participating lenders typically require two years of consistent employment,” Reuter points out.
• Residual income: The VA mandates that borrowers must meet regional minimum residual income guidelines to ensure affordability after all debts.
• VA funding fee: You’ll have to pay a one-time funding fee (usually 2.15% of the loan amount for first-time use with no down payment; 3.3% for subsequent use). Fortunately, this fee is waived for veterans with service-connected disabilities or Purple Heart recipients (active-duty).

VA entitlements and joint VA loans

To understand joint VA loans, you need to understand VA entitlement  – the amount the Department of Veterans Affairs will guarantee on your VA loan. It's the maximum number of dollars the VA will pay your lender if you stop making your mortgage payments and default on your loan.

As of 2020, borrowers with full VA loan entitlements have no limit on how much they can borrow, even if they make no down payment. For these borrowers, the VA will pay lenders up to 25% of the total loan amount if they stop making their mortgage payments.

Note that VA loan borrowers receive a basic entitlement of $36,000. But this number reflects the amount the VA guarantees, not the maximum loan a VA-eligible borrower can borrow. For loans under $144,000, the VA covers up to $36,000 if the borrower defaults. When the loan amount exceeds $144,000, the VA typically guarantees 25% of the total loan.

Most veterans or active-duty service members qualify for the full entitlement if they've never taken out a VA loan before or paid off a previous VA loan and sold the home they purchased with the loan. Partial entitlement occurs when you’ve used some of your VA loan benefit on a previous home and haven’t restored it; in this case, although you may still qualify for another VA loan, the amount you're eligible to borrow without a down payment could be limited.

Also, when two or more borrowers who qualify for VA loans apply together, not every borrower has to use their VA entitlement. If two VA-approved borrowers apply for a joint VA loan and only one borrower uses their VA entitlement, the Department of Veterans Affairs will only guarantee 25% of the portion of the loan covered by the borrower who used their entitlement.

It's a good idea to confirm your current entitlement amount by requesting a Certificate of eligibility (COE).

Pros and cons of a joint VA loan

As with all mortgage types, a joint VA loan has advantages and disadvantages.

Pros

• You might qualify for a larger loan, allowing you to widen your search territory and buy a more expensive home by combining incomes and boosting your spending power.
• You can take out a loan with a friend, family member, or non-spouse partner.
• If you take out a joint VA loan with one or more borrowers who qualify for VA financing, you won’t need to make a down payment.
• A joint VA loan also requires no private mortgage insurance and comes with competitive interest rates and flexible DTI rules.

Cons

• If you take out a joint VA loan with a borrower who doesn’t qualify for VA benefits, that borrower may need to make a down payment.
• You will pay the VA funding fee (unless you qualify for a funding fee waiver). If you’re taking out your first VA loan and not making a down payment, your VA funding fee will be 2.15% of your total loan amount.
• Fewer lenders offer joint VA loans.
• The VA guarantees only the VA-eligible borrower’s share.
• Ownership problems may arise if your relationship with the co-borrower changes or dissolves.
• Using a joint VA loan can use up your entitlement, potentially limiting your future VA loan eligibility unless your entitlement is later restored.

If you don’t like these drawbacks, think about applying for other types of home loans. Consider a conventional loan, which requires a down payment that’s 3% of your home’s purchase price, or an FHA loan. Depending on your credit score, you can get an FHA loan with a 3.5% down payment.

How to apply for a joint VA loan

Although VA loans are insured by the Department of Veterans Affairs, you’ll need to meet with a private mortgage lender to apply for these loans. Fortunately, most lenders do offer VA loans.

1. Choose a lender and complete an application

When you meet with a lender, you’ll fill out a loan application, providing your full name, Social Security number, and previous addresses. You’ll also give your lender permission to check your credit. And you’ll need to submit a Certificate of Eligibility (COE) as well.

“Try to choose a lender experienced with VA loans and that understands the quirks of joint VA mortgages. Filling out as much of the application as you can at this juncture makes things much easier,” suggests Shirshikov.

2. Gather and provide documentation

Lenders will want copies of certain financial documents to verify your income. They may request valid government-issued photo identification, copies of your two most recent pay stubs, 2 months of bank account statements, and your last 2 years of tax returns. The veteran borrower should also be prepared to furnish a DD-214: a certificate of release or discharge from active duty. You should be able to upload or hand over these documents to your chosen lender.

“Keep in mind that both borrowers must complete the loan application, undergo a credit check, and sign income and asset disclosures,” Reuter says.

3. Meet the lender’s requirements

Lenders that offer joint VA loans will likely require a minimum credit score of 620 and a maximum DTI ratio of 41%. Also, you must meet cash reserve and income requirements and prepare to pay closing costs (including VA appraisal fees), which can range from 3% to 5% of your loan amount.

Qualifying for a VA loan with Rocket Mortgage® is easier: You’ll generally need a FICO® credit score of at least 580, and your monthly debts, including your new estimated mortgage payment, should equal no more than 43% of your gross monthly income.

4. Close on the home

Once the loan is approved, both borrowers will need to attend the closing on a predetermined closing date to finalize the loan. This is when you’ll review and sign all the paperwork and documents, pay the closing costs involved, and eventually receive the keys to the purchased home so you can take possession.

Joint VA loan FAQ

Still have questions about joint VA loans?. Here are some of the most frequently asked ones.

Can an unmarried couple apply for a joint VA loan?

Yes, an unmarried couple can apply for a joint VA loan. Whether it’s two friends, two romantic partners, or a brother and sister applying for a mortgage, the application won’t be treated any differently. And lenders will consider the income of both applicants. However, most lenders will require a down payment from the non-VA-eligible borrower to cover the non-guaranteed portion of the loan.

Are there loan limits on joint VA loans?

If you have full VA loan entitlement, there are no official loan limits on how much you can borrow with no down payment, even for joint VA loans. But if you’ve already used part of your entitlement, lenders typically rely on local conforming loan limits to determine how much you can finance without needing to put money down.

Can I get a VA loan if my dad served?

No. VA loan eligibility does not automatically transfer from parent to child, as a parent’s military affiliation usually doesn’t make their child eligible. However, if, like the parent, that child is a veteran, active-duty service member, or eligible surviving spouse of one, they would qualify for a VA loan.

Can a non-U.S. citizen be on a joint VA loan?

Yes, in some instances, a non-U.S. citizen may apply for a joint VA loan, along with a VA-eligible borrower, if they are a legal resident (possess a green card or appropriate visa) and meet all VA loan credit, DTI, and income qualifications. However, the VA only guarantees the VA-eligible borrower’s portion of the loan, and that borrower must occupy the purchased home as their primary residence.

What are the VA loan co-borrower requirements?

Co-borrowers on a VA loan must meet the same financial requirements as the other loan applicant. The co-borrower must share financial liability for the loan and typically be listed on the deed and title, too. Co-borrowers who don’t qualify for a VA loan may need to make a down payment to cover their portion of the loan.

The bottom line: Find out whether a joint VA loan is right for you

A joint VA loan allows a VA-eligible borrower to partner with one or more co-borrowers, including individuals not eligible for a VA loan on their own – thereby combining incomes, increasing buying power, and upping their chances of qualifying for a bigger loan amount. While the VA guarantees only the veteran’s portion – often allowing no down payment for that share – non-military co-borrowers may need to make a down payment. Applicants must meet credit, income, and residency requirements, and veterans must provide a Certificate of Eligibility and possibly a DD-214.

If you’ve served in the military or are currently on active duty, a joint VA loan may be the right choice for you. But before applying for a home loan, it’s important to learn more about VA loan closing costs, which can equate to around 3% to 5% of your loan amount. Depending on the size of your down payment – if you make one – and the number of times you’ve taken out a VA loan in the past, the VA funding fee (at least 2.15% of the loan amount) may be the determining factor that helps you decide which loan type is best for your situation. Disabled veterans, among others, are eligible for a funding fee waiver, so ask us if you aren’t sure if you qualify for a waiver.

Ready to apply for a joint VA loan? If so, start your mortgage application online today with Rocket Mortgage.