Does the Veteran Have to Be the Primary Borrower on a VA Loan?

A VA loan is a significant benefit designed to assist eligible service members, veterans, and certain surviving spouses in achieving homeownership. This mortgage option is backed by the U.S. Department of Veterans Affairs (VA) but is issued through private lenders. The program provides favorable terms, including competitive interest rates, and often no down payment requirement or private mortgage insurance (PMI). Understanding the specific criteria for this benefit and how individuals can utilize it to purchase a home is important for those considering a VA loan.

Veteran Eligibility for VA Loan Benefits

Accessing VA loan benefits requires meeting specific service requirements set by the Department of Veterans Affairs (VA). Eligibility criteria vary based on the period and type of service, and character of discharge. Active-duty service members need 90 continuous days of active service. Veterans who served during wartime periods, such as World War II, the Korean War, or the Vietnam War, need 90 days of active duty. For peacetime service, 181 continuous days are necessary.

National Guard and Reserves members may qualify after six years of honorable service. They might become eligible sooner if called to active duty for at least 90 consecutive days. Individuals discharged due to a service-connected disability are exempt from these minimum service time requirements. A discharge other than dishonorable is a universal requirement.

To confirm eligibility, a veteran must obtain a Certificate of Eligibility (COE) from the VA. This document verifies an individual meets the service requirements to apply for a VA loan. The COE can be requested online through the VA’s eBenefits portal, which is often the fastest method, sometimes providing the certificate within minutes. Alternatively, applicants can submit a request by mail using VA Form 26-1880, though this process may take several weeks. Many VA-approved lenders can also assist in obtaining the COE directly from the VA’s automated system, often in seconds, with proof of service like a DD Form 214.

Permissible Borrower Combinations

While the veteran’s entitlement is central, various scenarios permit other individuals to be included on the mortgage. Each arrangement has distinct implications for the loan structure and requirements.

When a veteran applies for a VA loan as the sole borrower, the loan is entirely based on their VA entitlement. This allows the veteran to fully utilize benefits like no down payment if they have full entitlement and no private mortgage insurance. The veteran must intend to occupy the property as their primary residence.

A veteran and their non-veteran spouse are treated as a single entity for VA loan purposes. The non-veteran spouse can be included on the loan without it being classified as a “joint loan.” The lender will assess the creditworthiness and income of both the veteran and the spouse to determine loan qualification. Both parties will be responsible for the mortgage payments, and their combined financial profiles can strengthen the loan application.

Two eligible veterans can combine their benefits to obtain a single VA loan. This arrangement allows them to pool their entitlements, potentially increasing their purchasing power or allowing for the acquisition of a more expensive property. They have options for how to use their entitlements, such as utilizing one veteran’s full entitlement and saving the other’s for future use, or splitting their entitlements evenly. This combination can be beneficial for military couples.

A more complex scenario arises when a veteran applies for a VA loan with a non-spouse, non-veteran borrower. This is typically referred to as a “joint VA loan.” In such cases, the VA’s guarantee generally extends only to the eligible veteran’s portion of the loan. The non-veteran co-borrower may be required to make a down payment on their share of the property, as their portion is not covered by the VA guarantee. Lenders will assess the credit and income of all borrowers, and all parties on the loan are jointly and severally liable for the debt. While some lenders may be hesitant to underwrite these types of loans, it is possible to find lenders who specialize in joint VA loans.

Financial and Entitlement Considerations

Various financial aspects and entitlement considerations come into play with different borrower combinations on a VA loan. The use of VA loan entitlement varies significantly depending on the borrower combination. In a traditional VA loan with a single veteran or a veteran and their spouse, the veteran’s entitlement fully covers the loan, often resulting in no down payment. For joint VA loans involving a veteran and a non-spouse, non-veteran, the VA only guarantees the veteran’s portion of the loan, half. This structure necessitates a down payment from the non-veteran co-borrower to cover the unguaranteed portion, which can be around 12.5% of their share. If two eligible veterans apply, they can combine their entitlements, allowing for a larger guaranteed amount.

All borrowers on a VA loan, regardless of their veteran status or entitlement usage, are held jointly and severally liable for the entire debt. This means that each borrower is individually responsible for the full amount of the loan, not just their proportional share. If one borrower defaults on payments, the lender can pursue the remaining borrowers for the entire outstanding balance. This shared liability underscores the importance of all parties understanding their financial obligations.

Lenders assess the creditworthiness and income of all individuals listed on the loan application. While the VA does not set a minimum credit score, most lenders typically require a score of at least 620. The combined income and debt-to-income (DTI) ratios of all borrowers are evaluated to ensure repayment ability. This assessment ensures that even with the VA guarantee, the loan meets the lender’s underwriting standards.

The VA funding fee is a one-time charge paid to the VA to help sustain the loan program. The amount of this fee varies based on the loan type, whether it’s a first-time or subsequent use of the benefit, and the down payment amount. Certain veterans, such as those receiving compensation for service-connected disabilities or Purple Heart recipients, are exempt from paying this fee. In joint loan scenarios, the funding fee calculation can be complex, often allocated proportionally to each veteran’s share of the loan, even if a non-veteran is involved.