Welcome to our VA loan co signer guide! Homeownership is a fundamental part of the American Dream – a home to call your own, memories to be made, and an asset that grows in value over time. However, not everyone can easily qualify for a home loan, especially veterans and active service members who may have been wounded or killed in the line of duty. Thankfully, the VA loan program was created to help veterans and active service members achieve the dream of homeownership. However, sometimes, VA loan applicants may have difficulty qualifying for a VA loan on their own. In such cases, a VA loan co signer can help.
What Is A VA Loan Co Signer?
A VA loan co signer is someone who agrees to share the responsibility of paying back the VA loan with the primary borrower. Co signers typically have a good financial standing, credit score, and income, which helps the primary borrower qualify for the VA loan. The co signer’s financial details are taken into account when assessing the primary borrower’s eligibility for the VA loan. If the primary borrower is unable to make the loan payments, the co signer is responsible for making them. Therefore, the co signer takes on a significant financial responsibility, and they must be willing and able to do so before becoming a co signer.
Who Can Be A VA Loan Co Signer?
Not everyone can be a VA loan co signer. The co signer must meet certain eligibility criteria, as well as undergo a credit check and a debt-to-income ratio assessment. Here are some of the people who can be VA loan co signers:
Eligible Co Signers |
Non-Eligible Co Signers |
|---|---|
Veterans |
Non-Occupant Co signers |
Active Duty Service Members |
Co signers With A Poor Credit History |
Spouses Of Veterans Or Active Duty Service Members |
Co signers Without Documentation Of Income Or Employment |
Surviving Spouses Of Fallen Service Members |
Co signers With High Debt-To-Income Ratios |
How Can A VA Loan Co Signer Help?
A VA loan co signer can help the primary borrower in several ways:
1. Enhanced Eligibility
A VA loan co signer can help increase the primary borrower’s eligibility for a VA loan by providing additional income and a good credit score. This helps ensure that the primary borrower meets the VA loan program’s eligibility requirements.
2. Better Interest Rates
With a co signer, the primary borrower may be eligible for better interest rates on their VA loan. The co signer’s financial strength enables the primary borrower to qualify for a better rate, which translates into lower monthly payments and a more affordable mortgage in the long run.
3. Lower Down Payment Requirements
Having a VA loan co signer can reduce the down payment requirements for the primary borrower. This is particularly beneficial for veterans and active service members who may not have enough savings to put down a substantial down payment. A co signer can help bridge the gap and make homeownership a reality.
What Are The Risks Of Being A VA Loan Co Signer?
Being a VA loan co signer comes with inherent risks that cannot be overlooked. Before agreeing to become a VA loan co signer, it is essential to understand these risks:
1. Financial Obligation
As mentioned earlier, the VA loan co signer has a joint financial obligation to repay the loan if the primary borrower defaults. If the primary borrower cannot make the loan payments, the co signer must be prepared to take over the payments or face being sued by the lender. If the co signer fails to make the payments, it will negatively impact their credit score and financial standing.
2. Legal Liability
If the primary borrower defaults on the VA loan, the lender can go after the co signer for the outstanding loan balance. This means that the co signer could face legal action, wage garnishment, liens on their assets, and other legal consequences.
FAQs
1. Can A Non-Veteran Be A VA Loan Co Signer?
No, a non-veteran cannot be a VA loan co signer. The only people who can be VA loan co signers are veterans, active duty service members, their spouses, and surviving spouses of fallen service members.
2. Can More Than One Person Co Sign A VA Loan?
Yes, multiple people can co sign a VA loan. However, each co signer’s financial details will be taken into account when assessing the primary borrower’s eligibility for the VA loan.
3. Do VA Loan Co Signers Need To Live In The Property?
No, VA loan co signers do not need to live in the property. However, they must meet the VA loan program’s eligibility requirements to be able to co sign the loan.
4. How Does Being A VA Loan Co Signer Affect My Credit Score?
Being a VA loan co signer can positively or negatively impact your credit score. If the primary borrower makes all the loan payments on time, it can help boost your credit score. However, if the primary borrower defaults on the loan, it can negatively impact your credit score.
5. How Long Does A Co Signer Remain Obligated To A VA Loan?
The co signer remains obligated for the duration of the VA loan term. Therefore, if the primary borrower takes out a 30-year VA loan, the co signer remains obligated for the full 30 years, unless the loan is refinanced or paid off earlier.
6. How Much Income Do VA Loan Co Signers Need?
The amount of income a VA loan co signer needs depends on several factors, such as the size of the loan, the primary borrower’s credit score, and their debt-to-income ratio. However, as a general rule, the co signer’s income must be sufficient to cover the VA loan payments if the primary borrower cannot make them.
7. Can I Remove Myself As A VA Loan Co Signer?
You cannot remove yourself as a VA loan co signer. Only the primary borrower can request the removal of a co signer. This can be done by refinancing the VA loan or by applying for a loan modification or assumable loan. The primary borrower must meet certain eligibility requirements to qualify for these options.
Conclusion
VA loan co signers can be a valuable asset for veterans and active service members who may need assistance in qualifying for a VA loan. However, being a co signer comes with inherent risks that must be carefully considered. If you are considering being a VA loan co signer, make sure you understand the obligations and risks involved.
On the other hand, if you are a veteran or active service member in need of a VA loan, consider the benefits of having a co signer. A co signer can help increase your eligibility, lower your down payment requirements, and even get you better interest rates.
At the end of the day, homeownership is a goal worth pursuing, and the VA loan program can help you achieve it. With a little help from a VA loan co signer, you can get closer to making your dream a reality.
Closing Note
VA loans are a valuable resource for veterans and active duty service members who want to achieve the dream of homeownership. However, they are also complex and come with many requirements and obligations. If you are considering getting a VA loan, make sure you do your research and understand the process. Being informed can help you make the best decisions for your financial future.