VA Mortgage Co-Borrower
The definition of a co-borrower on a VA mortgage may seem a little
confusing but it is necessary to understand so you will grasp the future
legal issues if the veteran is taken out of the picture.
A veteran loan with his or her spouse will not be treated as a "joint loan" if the spouse is not a veteran, or is a veteran who will not be using his or her entitlement on the loan.
A mortgage to a veteran and fiancé who intend to marry prior to loan closing and take title as veteran and spouse will be treated as a loan to a veteran and spouse (conditioned upon their marriage), and not a joint loan.
Joint Loans or Co-BorrowersA "Joint loan" generally refers to a loan for
a veteran and another person who ais liable, and own the security.
A joint loan is a loan made to the veteran and one or more non-veterans (not spouse);
- The veteran and one or more veterans (not spouse) who will not be using their entitlement;
- The veteran and the veteran’s spouse who is also a veteran, and both entitlements will be used, or
- The veteran and one or more other veterans (not spouse), all of whom will use their entitlement.
Veteran/Non-veteran Joint Loan
A loan involving one veteran and one non-veteran will be used to represent any
type of joint loan involving at least one veteran using his or her entitlement and at least one other person not using entitlement (can be a veteran or non-veteran, but not a
spouse). For example: three veterans using entitlement and one
non-veteran or one veteran using entitlement and 4 non-veterans, or two veterans using entitlement and 2 veterans not using entitlement.
2 or More Veteran Joint Loan
A loan involving 2 veterans who are not married to each other, both using their entitlement: this term will also be used to represent any other type of joint loan involving only veterans, each of whom uses his or her entitlement. It can include loans to:
- The veteran and the veteran’s spouse who is also a veteran, if both entitlements will be used, or
- This is really cool, give it some thought. Three, four, or more veterans, all of whom will use their entitlement.
Occupancy
This is very important to understand. Any person who uses entitlement on a joint loan must certify intent to personally occupy the property as his or her home.
However, ... a borrower on a joint loan who does not use entitlement for the loan (such as a non-veteran),
does not have to intend to occupy the property.
Multiple Unit Properties
If the property is to be owned by two or more eligible veterans, it may consist of four family units and one business unit, plus one additional unit for each veteran participating in the ownership.
So, ... two veterans may purchase or construct residential property consisting of up to six family units (the basic four units plus one unit for each of the two veterans), and one business unit.
If the property contains more units than four family units plus one family unit for each veteran participating in the ownership and/or more than one business unit, the loan is not eligible for guaranty.
Prior Approval Required for Joint Loans
Any loan for which the veteran and the veteran’s spouse will hold title to the property, whether or not the spouse also uses entitlement, may be closed automatically by a lender with automatic authority.
However, any joint loan that the veteran will hold title to the property
along with any person other than the veteran’s spouse must be submitted for prior approval.
Veteran/Non-Veteran Joint Loan
Veteran’s credit must be satisfactory and veteran’s income must be sufficient to repay that portion of the loan allocable to the veteran’s interest in the property.
A different analysis applies to the portion of the loan allocable to the non-veteran. The credit of the non-veteran must be satisfactory. However, the combined income of both borrowers can be considered in evaluating repayment ability.
In other words income strength of the veteran may compensate for income weakness of the non-veteran, but income strength of the non-veteran cannot compensate for income weakness of the veteran in analyzing the veteran’s ability to repay his or her allocable portion of the loan
2 Veteran Joint Loan
Consider the credit and combined income and assets of both parties. Strengths of one veteran related to income and/or assets may compensate for income/asset weaknesses of the other.
Satisfactory credit of one veteran cannot compensate for the other’s poor credit.
Non-Purchasing Spouse
If a married veteran wants to obtain the loan in his or her name only, the veteran may do so without regard to the spouses debts and obligations in a
non-community property state.
However, ... in community property states, the spouses debts and obligations must be considered even if the veteran wishes to obtain the loan in his or her name only.
Debts assigned to an ex-spouse by a divorce decree will not generally be charged against a veteran-borrower.
This includes debts that are now delinquent.
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