"Can You Get a VA Loan With Someone Who Is Not Your Spouse?"

Yes, and VA has a name for that loan. A loan to a veteran and someone who is not their spouse is a joint loan, and three things about it work differently. Your lender submits the file to VA for prior approval rather than closing it on its own authority, VA guarantees only the veteran's share of the loan, and the funding fee is figured on that share.

I'm Jeff Moran, a mortgage broker in Bluffton, South Carolina, originating since 1996 and licensed in fifteen states, NMLS #483943, through C2 Financial Corporation. Adding a second person to a conventional loan mostly adds income. On a VA loan it also changes how the file is submitted, how much of the loan VA stands behind, and what your lender may want in exchange for the part it does not.

All of it is easier to sort out while you are still deciding who goes on the offer.

What does VA mean by a joint loan?

VA's lender handbook sets this out in Chapter 7, Topic 1, Joint Loans, change date March 11, 2019, with the regulations behind it at 38 C.F.R. 36.4307.

A joint loan generally means a loan where the veteran and other people are liable for the debt and own the property securing it. The handbook lists the combinations that count:

• A veteran and one or more people who are not veterans and are not the spouse.
• A veteran and one or more other veterans, not the spouse, who will not be using their own entitlement.
• A veteran and a spouse who is also a veteran, where both entitlements will be used.
• A veteran and one or more other veterans, not the spouse, all of whom will use entitlement.

A loan involving a veteran and a spouse is not treated as a joint loan if that spouse is not a veteran, or is a veteran who will not be using entitlement. So a married couple where one of you served and the other did not is an ordinary VA loan, and none of what follows applies to it.

What a VA loan is and how the benefit works covers eligibility and entitlement.

Why does this file have to go to VA before it closes?

Because the handbook says so, in one sentence: "Any joint loan for which the Veteran will hold title to the property and any person other than the Veteran's spouse must be submitted for prior approval."

Most VA loans never see VA before closing. A lender with automatic authority underwrites the file, closes it, and reports it afterward. The handbook keeps that route open for a veteran and a spouse holding title together, whether or not the spouse also uses entitlement, and closes it for everybody else on title.

What that means for your calendar is a submission to VA that happens between your underwriting approval and your closing date. That submission takes days you have to plan for, so you will want to know it is coming before you agree to a contract timeline.

How much of the loan does VA actually guarantee?

The veteran's share of it. Guaranty is limited to the portion of the loan allocable to the veteran's equal interest in the property. Your lender divides the total loan amount by the number of people on the loan, then multiplies by the number of veterans using entitlement. With one veteran and one other person, that first step is the answer: half the loan.

VA then figures the maximum potential guaranty on that half as if it were the whole loan, and guarantees the lesser of that amount or the entitlement the veteran has available. I am not printing a guaranty figure here, because the maximum moves with county loan limits.

The Certificate of Commitment VA issues on one of these loans carries a reminder in two parts. No part of the guaranty applies to the portion allocated to the person who is not a veteran. If the loan is foreclosed and a loss is sustained, whoever owns the loan at that point absorbs any loss attributable to that portion.

So your lender is carrying half of this loan with no VA guaranty behind it. The handbook tells the lender to satisfy itself that its investor's requirements, or the secondary market's, can be met with that limited guaranty. Some lenders are comfortable with it, some want a down payment on the unguaranteed half, and a few do not offer these loans at all. Whether a down payment comes up on your file is a question for the lender you are actually using, and it is a much better question in week one than in week five.

Whose income has to carry the loan?

The veteran's income has to be enough to repay the veteran's half of it on its own, and a co-buyer who earns more cannot make up a shortfall on that half. The handbook's underwriting table for a veteran and a non-veteran says the veteran's credit must be satisfactory and the veteran's income must be sufficient to repay the portion of the loan allocable to the veteran. The credit of the other person must be satisfactory too. Combined income can be considered in evaluating repayment ability, and then the handbook draws the line:

"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."

That sentence decides which side of the file you build around. A co-buyer earning less than the veteran is workable, because the veteran's income is already carrying the veteran's half.

Two veterans buying together works differently, and there the handbook does allow income and asset strength in one to compensate for weakness in the other.

This is where a VA joint loan parts company with the conventional version. Adding a parent as a co-signer or co-borrower walks through how that works on a conventional loan, where the income simply pools. Buying a home together when you are not married covers the title and ownership questions that come up alongside this on any loan type.

How does the funding fee work when only one of you is a veteran?

It gets figured on the veteran's allocated share. The handbook says the actual loan amount is allocated equally between the people on the loan for funding fee purposes, whether or not a down payment is made, and regardless of whose money the down payment came from. No fee is assessed on the portion allocable to a person who is not a veteran, to a veteran who did not use entitlement, or to a veteran who used entitlement but is exempt.

The percentages themselves live in Chapter 8 of the handbook and they change, so I keep them off this page on purpose. How the VA funding fee works covers the exemptions and how the fee lands in your numbers. On the closing side, which VA closing costs a veteran is not allowed to pay covers the fees that belong to somebody else on any VA purchase.

What if you are getting married before closing?

Then the file is probably not a joint loan at all. The handbook addresses it directly. A loan to a veteran and a fiancé who intend to marry before loan closing, and to take title as veteran and spouse, is treated as a loan to a veteran and spouse, conditioned upon the marriage.

So the wedding date and the closing date decide which rules the file runs under. Marrying before closing puts you on the ordinary route with no prior approval submission and a full guaranty, while closing first leaves you with a joint loan on the day it closes. That order is worth deciding on purpose rather than finding out about afterward.

Who has to live there, and how many units can the property have?

The veteran using entitlement has to certify intent to personally occupy the property as their home. That obligation falls on the veteran specifically, and it does not transfer to the other person on the loan.

On the unit count, a property owned by two or more eligible veterans may consist of four family units and one business unit, plus one additional unit for each veteran in the ownership. Two veterans can therefore buy or build up to six family units and one business unit, and past that the loan is not eligible for guaranty.

An illustration, with made up numbers

Numbers below are invented to show the mechanism. They are not a quote, an approval, or a prediction about any particular file.

Say a veteran and a sibling are buying together and the loan amount is $400,000. Two people on the loan, one of them using entitlement. The allocation step looks like this:

Total loan amount              $400,000
Divided by people on the loan         2
Veteran's allocated portion    $200,000
Portion with no VA guaranty    $200,000

VA computes the maximum potential guaranty on the $200,000 as though it were the whole loan, then guarantees the lesser of that amount or the entitlement the veteran has available. The funding fee, if one is owed, is figured on the veteran's $200,000 and not on the sibling's. The other $200,000 has no guaranty behind it, which is the half your lender is deciding how to treat. Put three people on the same $400,000 loan and the veteran's portion drops to roughly $133,333, with the guaranty and the fee shrinking to match.

What tends to go wrong on these files?

The prior approval step surfaces after the contract is signed. A closing date agreed without room for the submission to VA is the most common way one of these gets extended.

Somebody counts on the co-buyer's income to fix the veteran's side. The handbook only lets that help run one direction, so a file built the other way comes back to the same question.

The zero down assumption goes unchecked. VA's no down payment purchase is still available on a joint loan, and the lender carrying the unguaranteed half is the one who decides how to treat it, so that is worth confirming with your own lender early.

The wedding and the closing get scheduled independently. Which side of the closing date the marriage falls on decides whether this is a joint loan, and that is usually the easiest thing on this list to adjust.

It gets treated like a conventional co-signer arrangement. A conventional co-signer does not have to own the property, while on a VA joint loan everyone on the note is also on title and owns the home securing the loan.

Where to start

You can price your own purchase scenario without a credit pull and without giving me your name. Run it at the price you are considering, then choose the option that works best for you. That selection can change later.

Three questions are worth bringing to the conversation about structure: who is going on title, whether anybody is getting married between now and closing, and whose income is carrying which part of the payment. How to get pre-approved covers what the documents look like on any purchase. If the veteran already owns a home bought with a VA loan, using the benefit a second time while keeping the first home covers what is left of the entitlement, which is the number this whole calculation runs on.

Nothing here is a loan approval, a denial, a commitment to lend, or legal advice. VA's handbook text can be updated, so please confirm the guidance in force with your lender, and take title questions to an attorney in the state where you are buying.

Common questions

Can a VA loan have a co-borrower who is not a spouse?

Yes. VA calls it a joint loan, and it covers a veteran buying with someone who is not a veteran, or with another veteran who is not the spouse. It is set out in VA Pamphlet 26-7, Chapter 7, Topic 1, change date March 11, 2019, with regulations at 38 C.F.R. 36.4307. The file goes to VA for prior approval, VA guarantees only the portion allocable to the veteran, and the funding fee is calculated on that same portion.

Does a VA joint loan need VA approval before closing?

Yes, when anybody other than the veteran's spouse will hold title with the veteran. The handbook says any such joint loan must be submitted for prior approval, so a lender with automatic authority cannot close it on its own. A loan where the veteran and the veteran's spouse hold title can still be closed automatically, whether or not the spouse also uses entitlement.

How much does VA guarantee on a joint loan with a non-veteran?

Only the veteran's share. The loan amount is divided by the number of people on the loan, then multiplied by the number of veterans using entitlement. VA computes the maximum potential guaranty on that portion and guarantees the lesser of that amount or the entitlement available. The Certificate of Commitment states that no part of the guaranty applies to the non-veteran's portion, and that a holder absorbs any foreclosure loss attributable to it.

Does the person who is not a veteran pay a VA funding fee?

No. The fee applies only to the portion allocable to a veteran who is using entitlement and is not exempt. The handbook says the loan amount is allocated equally between the people on the loan for this purpose, whether or not a down payment is made and regardless of where that money came from. No fee is assessed on the share belonging to a person who is not a veteran, a veteran not using entitlement, or an exempt veteran.

What happens if my fiancé and I marry before the loan closes?

The handbook treats a loan to a veteran and a fiancé who intend to marry before closing, and to take title as veteran and spouse, as a loan to a veteran and spouse conditioned on the marriage. That means no prior approval submission and a guaranty on the full loan, so the order of the wedding and the closing is worth deciding deliberately.

Can two veterans buy a home together with VA loans?

Yes, and the handbook has a separate set of rules for it. Your lender looks at the credit of both of you and at your combined income and assets, and here income or asset strength in one of you can make up for weakness in the other. Good credit on one side still cannot make up for poor credit on the other. VA charges entitlement to both of you, divided equally where it can be, and an uneven split needs a written agreement between the two of you.