Today’s topic is about VA loans and co-signers. The VA has some unique rules about what co-signers can do on a VA loan. So let’s dive in.
Married Couples
The VA loan is primarily created for married couples. If you’re married, the spouse acts as the co-signer on the VA loan. The VA will guarantee the loan the same way as if a veteran took it out for themselves.
VA Loans and Unmarried Couples
You can do a VA loan where you have a vet and somebody that is unmarried with them on the loan.
For example, if you had a $100,000 loan that you wanted to buy, the VA places a 25% guarantee on it. So that’s $25,000. But in this instance, you have a veteran and they’re not married to the person that wants to buy the home with them.
If we cut that $25,000 in half, $12,500 of it would be from the VA to the veteran, and the other $12,500 would be a cash contribution to the loan from the unmarried participant in the loan transaction. That’s one possibility.
Unmarried Veterans Buying a Home Together
Another scenario is you can have two veterans buying a house together that may or may not be married. This includes scenarios like a veteran buying a house with their veteran father, a veteran mother and her veteran son or daughter, or any other combination of two veterans.
When two unmarried veterans buy a home together using a VA loan, it’s called a split entitlement loan. This means we’re going to use that $12,500 entitlement in the example above for one veteran and $12,500 for the other veteran.
Please remember if you’re going to do a loan like this that it will require some extra time to process the required paperwork. In general, allow for an extra two to three weeks to get the loan done.
Bottom Line
Co-signing a VA Loan is primarily impacted by marital status and whether each co-signee is a veteran. The only scenario where an additional cash contribution to the loan would be required up-front is for unmarried couples where one person is not a veteran.
