It’s no secret that paying a down payment on a home can potentially help decrease your monthly payments. Home loans backed by the United States Department of Veterans Affairs (VA) usually don’t require a down payment, but it’s not a bad idea to consider one to help ease your future self’s financial burdens. However, not everyone has the funds to put money down on a home right away. That’s where a loan option comes in that can help you both pay for a down payment and buy a home with someone who doesn’t have to be married to you.
Read on to learn more about joint VA loans and find out if they’re right for you.
Joint VA loans backed by the U.S. Department of Veterans Affairs are mortgages that allow two individuals to buy a home together where at least one borrower is eligible for a VA loan. All those on the loan are responsible for the mortgage payments and both share ownership of the home bought with the loan.
There are several combinations of borrowers who can apply for a joint VA loan. This includes:
Only one borrower meets the VA eligibility requirements, and the VA will only back this borrower’s portion of the mortgage. The non-eligible borrower may be required to make a down payment.
Two or more eligible borrowers who are not married and in which not all borrowers are using their entitlement. The VA actually sees this scenario the same as an eligible borrower and a non-eligible borrower applying for a loan together since one of the eligible borrowers wouldn’t be using their entitlement benefit and their portion of the loan wouldn’t be backed by the VA. In this scenario, you may be required to pay a down payment.
Two or more eligible borrowers who are not married and whose portions of the loan will all be backed by the VA since they’re all using their entitlement. Any borrowers who haven’t taken out a VA loan before have access to all of their entitlement while borrowers who have taken out a VA loan in the past may have only partial entitlement. While the VA prefers tapping into each eligible borrower’s entitlement equally, they may perform unequal divisions of entitlement depending on each borrower’s situation and need.
An eligible military borrower and their non-military spouse who apply for a loan are not treated as a joint VA loan but a regular VA loan. The VA treats an eligible military borrower and their spouse as one entity even if only one of them meets the service requirements.
If you’re a veteran or eligible military borrower with a lower income stream, you may want to consider a joint VA loan with a family member or friend. Since lenders can use all borrowers’ incomes when approving the application, you might qualify for a larger loan, meaning your budget for a home could be larger.
Because the VA only covers the eligible military borrower’s portion of the mortgage, a down payment from the non-eligible co-borrower could help offset the increased cost. Your monthly mortgage payments could decrease if they pay a down payment as well, which could help with your monthly budget for other necessities. The size of the required down payment may vary by lender but typically, the more you put down, the less your monthly payment.
Remember that when you do apply for a joint VA loan, you’re splitting homeownership with that co-borrower. Whether they’re a friend, family member or partner, make sure you trust each other enough to dive into this long-term financial responsibility together. Depending on your own situation, however, a joint VA loan may be the solution for your specific needs. And hopefully you find deciding to apply for one is easier after reading this blog.
No matter what you decide, make sure you discuss with the VA if you have any questions or concerns as well as work with any reputable mortgage lenders or real estate agents to help ensure the homebuying process goes as smooth as possible.
This information is intended for educational purposes only. Products and interest rates subject to change without notice. Loan products are subject to credit approval and include terms and conditions, fees and other costs. Terms and conditions may apply. Property insurance is required on all loans secured by property. VA loan products are subject to VA eligibility requirements. Adjustable Rate Mortgage (ARM) interest rates and monthly payment are subject to adjustment. Upon submission of a full application, a mortgage banker will review and provide you with the terms, conditions, disclosures, and additional details on the interest rates that apply to your individual situation.