Using a Co-Borrower for a VA Loan
Buying a house with a co-borrower alleviates some of the inherent financial burden of ownership and may enable veterans to afford homes they wouldn't be able to on their own. Typically co-borrowers are a spouse of the borrower, but they don't have to be. Regardless of who your co-borrower is, there are a few major caveats to consider before jumping in.
It's important to note that a co-borrower is not the same thing as a co-signer. A co-signer is someone who helps offset any dings against your loan eligibility by taking partial responsibility for paying off the loan. In general, using or being a co-signer is considered to be a financially unsound decision. But, co-borrowers present far different opportunities.
According to PRWeb, there are two types of individuals who qualify to be a co-borrower:
- Spouses. When couples look for a home together, they often put both their names on the loan. Applying for a VA loan with your spouse as a co-borrower, regardless of their veteran status, is no different than with other loans.
- Veterans. Except for a spouse, no civilians may co-borrow for a VA loan. Furthermore, the veteran you choose to be a co-borrower must intend to live on the property with you.
Whether they're your spouse or a close friend, purchasing a home with a co-borrower carries a degree of risk and must be thoroughly considered before any major decisions are made.
One of the most important obstacles to consider is your co-borrower's future financial stability. Their responsibilities don't stop at supplementing your payments, they're responsible for the entire property in case the primary borrower, you, can no longer make them. Because of this, you may have a tough time convincing the VA to accept your proposed co-borrower if they earn substantially less money or are a potential risk for any reason.
If you're at all concerned about whether or not the VA will accept your preferred co-borrower, there are a few things you can do to help solve the problem before being denied.
Check Their Credit
Regardless of whether your co-borrower is your spouse or best friend of twenty years, you need to know what their credit score is. If you trust each other enough to take joint financial responsibility for a home which you'll both be living in, no one's credit score should be a secret. Solving bad credit isn't a fast process, but taking time to raise their score before attempting to buy may help prevent worry and stress in the future.
Calculate Their Income
While it may seem absurd to be so thorough with people you most likely know better than anyone else, it's important to take each variable in the process seriously. If your co-borrower candidate doesn't have enough income to reliably help with the mortgage payments, it's far better to risk a heated exchange before committing to a home purchase. Ideally, both the primary borrower and the co-borrower know each other's finances well enough to make informed, secure decisions about the purchase of their home and planning their monthly budget.