Guide to Joint VA Loans

For many military members, the dream of homeownership often comes with personal relationships and financial strategies outside the military community. It's not uncommon for a service member to consider buying a home with a non-military individual, whether it’s a family member, friend or life partner.

A joint VA loan allows you to enjoy the benefits of a VA loan as long as one of the borrowers meets the eligibility requirements.

Traditional VA Loan vs Joint VA Loan

The main difference between a traditional VA loan and a joint VA loan comes down to who's borrowing and how the VA guaranty applies.

With a traditional VA loan, the borrower is either a Veteran alone or with their spouse. The entire loan is covered by the Veteran's entitlement, so the VA guaranty applies to the full loan amount, which is why no down payment is required.

With a joint VA loan, the guaranty applies only to the Veteran's ownership share. If that guaranteed portion falls short of 25% of the total loan, borrowers may need to cover the gap with a down payment. That's why the Veteran's share of ownership and available entitlement matter so much in a joint loan scenario.

The other key distinction: a traditional VA loan with a co-borrower still requires that co-borrower to be VA-eligible. Joint VA loans open the door for non-military borrowers to be on the loan.

Let’s walk through a few common joint VA loan scenarios.

Scenario 1: Veteran + Non-Veteran

A Veteran and a civilian friend buy a $400,000 home together with 50/50 ownership. The VA guarantees 25% of the Veteran's $200,000 share, covering $50,000 of the total. But lenders typically require a 25% guaranty on the full loan amount, or $100,000 total.

That $50,000 gap would likely need to be covered with a down payment.

Scenario 2: Two Veterans Using Unequal Entitlement

Two unmarried Veterans, Doug and Lisa, buy a $300,000 home together, splitting the loan 50/50. Doug has full entitlement and Lisa has $50,000 of remaining entitlement. Together, their combined guaranty clears the lender's $75,000 requirement (25% of $300,000), so no down payment is needed.

Scenario 3: Veteran With Limited Entitlement + Non-Veteran

A Veteran with only $80,000 of remaining entitlement wants to buy a $500,000 home with a non-Veteran co-borrower. The lender requires $125,000 in guaranty coverage (25% of $500,000), but the VA can only back $80,000.

To close that $45,000 gap, the borrowers would need to put down at least $45,000, roughly 9% of the purchase price. At that point, a VA loan may not be the best fit. You should talk with your loan officer about other financing options.

Joint VA Loan Requirements

In addition to traditional VA loan requirements, there are joint VA loan guidelines to be aware of:

• Any loan involving a non-spouse borrower requires VA prior approval before closing. This review doesn't happen until the lender has completed full underwriting, typically near the end of the buying process.
• The Veteran using entitlement must intend to occupy the property as their primary residence.
• The creditworthiness and income of all borrowers are considered during underwriting.
• A down payment may be required if the Veteran's guaranteed share doesn't cover 25% of the full loan amount.
• Only the Veteran using entitlement is responsible for the VA Funding Fee, calculated on their share of the loan (unless they qualify for an exemption).

VA Entitlement and Joint Loans

VA loan entitlement is the amount the VA guarantees on a home loan. The VA will only guarantee the Veteran's portion of the loan, so a down payment might be necessary if there's a non-military borrower on the loan who isn't your spouse.

When two or more VA-eligible borrowers apply together, not every borrower is required to use their entitlement. If only one borrower uses their entitlement, the VA will guarantee only 25% of the loan amount covered by the Veteran using entitlement.

If both VA-eligible borrowers want to use their entitlement, that is completely acceptable and referred to as dual entitlement for a VA loan. However, a written agreement is required if there is unequal entitlement usage between Veterans.

When to Use a Joint VA Loan

There are certain instances when a joint VA loan may be your best choice. Let’s take a look at some common scenarios:

• Purchasing with a non-Veteran friend or family member: A Veteran looking to purchase a home with a friend who isn’t a spouse or family member might opt for a joint loan.
• Unmarried couples: A joint VA loan can offer the perfect solution for a Veteran and their unmarried partner to co-purchase a home while leveraging the Veteran's benefits. If a Veteran plans to buy a home with a fiancé who is a non-Veteran and they want to close the loan before getting married, a joint loan would be necessary.
• Combined resources: A Veteran might want to pool resources with a non-Veteran to afford a more expensive property that would be beyond their individual financial reach.
• Purchasing a multifamily home with more than four units: A Veteran co-owning a property with other eligible Veterans can have four residential units, one business unit and an additional unit for each participating Veteran.
• Second VA loan: If a Veteran has already used their entitlement on a home but has some remaining, they might use a joint loan with another Veteran who has full entitlement on a second home.

In each of these cases, it's crucial to understand that the VA will only guarantee the portion of the loan corresponding to the eligible Veteran's entitlement, and non-Veterans on the loan will typically need to make a down payment on their share of the purchase.

Connect with a Veterans United VA loan expert at 855-870-8845 or get started online to see if you qualify for a joint VA loan and discuss your options.