VA home loan requirements tend to be more flexible than conventional loan requirements. This is because VA loans are backed by the United States Department of Veteran Affairs which guarantees a portion of the loan to the lender if the borrower defaults on the loan.
Although the requirements are more lenient than other types of loans, there are situations where a VA-eligible borrower may not qualify for a home loan. These situations can range from having too low of a credit score to debt-to-income ratio issues.
If this happens, do not give up on purchasing a home because you can have a co-signer on a VA loan if the lender won’t give you financing based on your personal information alone. Below, we discuss VA home loans and cosigner eligibility requirements.
What is a VA Loan?
VA home loans are provided by private lenders to military service members, eligible veterans, and eligible surviving spouses to purchase a home, complete home improvements, or refinance a mortgage. The VA loan limitation in 2023 is $726,200.
Benefits of a VA Loan
Since VA loans are guaranteed by the government, VA lenders can offer flexible loan terms regarding income and credit requirements. The most common VA home loan benefits for VA-eligible borrowers include:
- No Down Payment
- No Private Mortgage Insurance
- Competitive Interest Rates
- Lenient Credit Score Requirements
- Limited Closing Costs
- No Loan Limits
- No Penalties for Early Payoff
A few things to note are that VA loans are only approved for primary residences. They may cover two homes if the veteran stays at each property for a minimum of six months out of the year.
Also, VA loan fees are closing costs plus a VA funding fee that ranges from 0.5% to 3.6% of the loan amount. Typically the closing costs are added to the loan amount but the funding fee is mandatory.
VA Loan Co-Signer vs VA Loan Co-Borrower
A co-signer helps you get approved for the loan and serves as a second contact if you were to default on the loan. Co-signers take responsibility for the debt if the borrower defaults but they are not added as a titleholder.
A co-borrower shares responsibility for the mortgage payments and owns a portion of the home’s equity. Their income, credit, and assets are used to qualify for the loan, similar to a co-signer but co-borrowers are added as a titleholder.
VA Loan Co-Signer Eligibility Requirements
A co-signer must qualify for a VA loan just like the primary borrower. That means they must meet one of the following requirements:
- Served 90 consecutive days of active service during wartime.
- Served 181 days of active service during peacetime.
- Have 6 years of service with the National Guard or Reserves or served 90 days (minimum of 30 days consecutively) under Title 32 orders.
- Spouse of a service member who died while serving or due to a service-connected disability.
Additionally, the co-signer must occupy the home with the primary loan borrower. This means that another active duty military member or veteran can co-sign a home loan as long as they live in the home with you.
Do You Need a Co-Signer?
A co-signer tends to be a safety net if you are unable to make your payments. Mortgage lenders oftentimes will encourage a co-signer because they have two points of contact if you enter financial trouble.
However, do you really need a co-signer? VA home loans offer incredible benefits to veterans and service members with minimal credit requirements, zero down payments, and competitive interest rates because they are backed by the VA.
It is recommended that you speak with a mortgage provider before deciding to have a co-signer. The first step is to request a certificate of eligibility (COE). Most VA mortgage lenders have access to an online system called Web LGY where they can retrieve this information.
If you are uncomfortable with what one lender has advised, check with other VA lenders before deciding to move forward. Since the VA does not have specific requirements for credit scores, you may simply need to work with a different lender that has lower requirements for their borrowers.
VA Loans with VA Loans for Vets
If you are an active duty service member, veteran, or surviving spouse who is interested in buying a home, you may qualify for a VA mortgage.
If you are looking to purchase a home but are not sure if you qualify, check your eligibility today or contact the VA Loans for Vets team at (602) 908-5849 to begin the process.