Can I Have a Cosigner on a VA Loan?

The VA home loan program offers a valuable benefit to eligible service members, veterans, and their spouses, often allowing home purchases without a down payment. A common question is whether a cosigner can be included on a VA loan. The answer is yes, but specific conditions and implications apply based on the cosigner’s relationship and eligibility.

Understanding Cosigner Relationships

In a VA loan, “cosigner” and “co-borrower” have important distinctions. A co-borrower typically lives in the home, shares ownership, and is equally responsible for payments. A cosigner does not usually live in or own the property but guarantees the loan, sharing liability if payments are missed. Understanding this difference is important for occupancy and ownership.

When two eligible veterans apply together, they can both be co-borrowers and utilize their respective VA entitlements. Both parties must typically occupy the home and meet lender financial standards.

A common scenario involves a veteran and their non-veteran spouse. A spouse is generally considered a co-borrower, and the loan can still be fully guaranteed by the VA, provided the veteran’s entitlement is sufficient. This arrangement usually does not necessitate a down payment and is treated similarly to a single veteran application for guaranty purposes.

The most complex situation involves a veteran and a non-spouse, non-veteran co-borrower, such as a family member or unmarried partner. This is typically structured as a “joint VA loan.” In such cases, the VA only guarantees the veteran’s portion of the loan, which is usually half. The non-veteran’s portion is not guaranteed by the VA and often requires a down payment, effectively making it a joint loan rather than a fully VA-backed loan.

Financial Considerations for Cosigned VA Loans

The VA funding fee, a one-time charge paid at closing, helps sustain the VA loan program. It typically ranges from 0.5% to 3.3% of the loan amount, depending on factors like loan type, prior VA loan usage, and down payment. If a non-veteran, non-spouse co-borrower is involved in a joint VA loan, the funding fee applies only to the veteran’s guaranteed portion.

The veteran’s VA loan entitlement usage is also affected, particularly in joint loan scenarios with a non-spouse, non-veteran. In these situations, the veteran’s entitlement only covers their portion of the loan. This partial use of entitlement could limit the veteran’s remaining benefit for future VA loans, as the full entitlement might not be restored until the current loan is fully repaid or refinanced.

All cosigners or co-borrowers assume shared liability for the loan repayment. This means that regardless of who occupies the home or whose income primarily supports the payments, all parties on the loan are equally responsible for the debt. Defaulting on the loan can negatively impact the credit scores of all individuals involved, and lenders can pursue repayment from any liable party.

A down payment requirement often arises in joint VA loan scenarios where a non-veteran, non-spouse is a co-borrower. Because the VA only guarantees the veteran’s portion, the non-guaranteed share typically requires a down payment, often around 12.5% of that non-guaranteed amount. This is a significant difference from traditional VA loans, which often allow for zero down payment for eligible veterans and their spouses.

Cosigner Qualification and Loan Application

For a cosigner to be approved for a VA loan, they must meet specific financial criteria. Lenders typically look for a solid credit history and a satisfactory credit score, with many requiring a minimum FICO score of at least 620 from all applicants. The lender will often consider the lowest credit score among all parties when making a decision.

Cosigners must also demonstrate a stable and sufficient income to cover their financial obligations. Lenders assess the combined debt-to-income (DTI) ratio of all applicants, which compares total monthly debt payments to gross monthly income. While the VA does not set a strict maximum DTI, it suggests lenders apply additional scrutiny for ratios exceeding 41%. A cosigner’s strong income and low DTI can help strengthen the overall application, particularly if the veteran’s financial profile is borderline.

The loan application process when involving a cosigner requires the submission of their financial documentation alongside the veteran’s. This includes proof of income, such as pay stubs and tax returns, and details of their existing debts. Lenders will underwrite the loan based on the combined financial picture of all borrowers, evaluating their collective income, assets, and liabilities. The cosigner’s involvement can improve the chances of approval or secure more favorable loan terms.

The veteran must generally intend to occupy the property as their primary residence, usually within 60 days of closing. While a co-borrower typically also occupies the home, a pure cosigner (who solely guarantees the loan without ownership) is not required to live in the property.