Special rules apply when co-borrowers who are not married take out a VA home loan.
All co-borrowers don'tÂ need to be VA-eligible. However, only theÂ eligible borrower's portion of the loan gets a VA guaranty. Entitlements are pro-rated when joint borrowers include:
When you buyÂ a home with a non-veteran spouse, that is not considered a joint loan, and your entitlement is not curtailed.Click to see today's rates (Mar 28th, 2017)
When there are VA-eligible and non-VA-eligible borrowers, the lender must pro-rate the amount of the guaranty. For example:
The lender can choose to accept what amounts to a 12.5 percent guaranty ($50,000 of $400,000). This is unlikely, however -- in most cases, the VA lender would require a down payment.
For mostÂ VA home loan borrowers, the 25 percent guaranty limits the lender's exposure to 75 percent of the property value. So foreclosure losses up to 25 percent are covered by the VA.
Lenders funding joint VA mortgages generally want the same protection, so they'll usually require a down payment toÂ make up any pro-rationÂ of the guaranty.
In this case, the required down payment would probably be 12.5 percent, or $50,000 to give the lender its 25 percent cushion.
To use your VA entitlement, you must certify that you intend to make the house your primary residenceÂ â€“ you canâ€™t just use your entitlement to help a friendÂ buy a house that you wonâ€™t be living in.
You need to meet standard VA underwriting guidelines, which are fairly liberal.Â The VA states, "Veteranâ€™s credit must be satisfactory and veteranâ€™sÂ income must be sufficient to repay that portion of theÂ loan allocable to the veteranâ€™s interest in the property."
The VA has not established a minimum credit score, although many VA lenders have -- often between 620 and 640. The average FICO for approved VA home loans, according to Ellie Mae, is 707.
The non-VA borrowerâ€™s income cannot be used to compensate for inadequate income on your part.
Your income should be sufficient to cover Â your portion of the monthly mortgage payment, property taxes and insurance, plus monthly payments on your accounts like auto loans and credit cards.
Lenders determine this either by applying a maximum debt-to-income (DTI) ratio of 41 percent, or using a residual income formula for your household size and location.Click to see today's rates (Mar 28th, 2017)
Non-eligible co-borrowers do not have to certify that they will reside in the home.
For them, underwriting is slightly different. The non-eligible borrower's credit must also be satisfactory. However, theÂ combined income of both borrowers can beÂ considered in evaluating his or her repayment ability.
In other words:
Your lender has to submit your applicationÂ for prior approval to the VA. Expect your full loan approval to take a little longer because of this, and build that into any offer you make.
Current mortgage rates depend on the type of VA home loan you choose, your strength as a borrower, and how aggressively you shop for your VA mortgage.Click to see today's rates (Mar 28th, 2017)
The information contained on The Mortgage Reports website is for informational purposes only and is not an advertisement for products offered by Full Beaker. The views and opinions expressed herein are those of the author and do not reflect the policy or position of Full Beaker, its officers, parent, or affiliates.
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2017 Conforming, FHA, & VA Loan Limits
Mortgage loan limits for every U.S. county, as published by Fannie Mae & Freddie Mac, the Federal Housing Administration (FHA), and the Department of Veterans Affairs (VA)