Deciphering the VA Lender’s Handbook Chapter 7 Part 1
Chapter 6 of the VA Lender’s Handbook was dedicated to explaining how the different types of refinances available in the VA loan program work. The Interest Rate Reduction Refinance Loan (IRRRL) was covered in great depth, as was the cash-out refinance. Chapter 7 is dedicated to explaining different loan types and scenarios that will require special considerations in processing and underwriting. In this article, we’ll be specifically talking about joint VA loans. We’ll cover what is considered a joint loan, the terminology you’ll hear when talking about joint loans, and the occupancy requirement for joint VA loans.
First, a joint VA loan typically refers to a loan for which a veteran and another person are liable, and the veteran and the other person own whatever is securing the loan. A loan can be made to the following parties: a veteran and one or more nonveterans that are not the spouse of the veteran, a veteran and one or more other non-spouse veterans that will not be using their entitlement, a veteran and his or her spouse who is also a veteran, and both will use their entitlement, and lastly, a veteran and one or more other non-spouse veterans who will also be using their entitlement. In other words, if a veteran is co-signing on a VA loan with anyone other than a non-veteran spouse, it is considered a joint VA loan. For loans being made to a veteran and his or her spouse, it is not considered a joint loan if the spouse is either not a veteran, or is a veteran but will not be using his or her entitlement on the loan.
A borrower may be in a situation where he or she is engaged and is intending to marry before the closing of the loan. In this case, the loan will usually be made as a loan to a veteran and spouse instead of a joint loan, but will be conditional upon their marriage. Should the marriage be postponed, the loan will likely either need to be processed as a joint loan or also postponed. Now that we know what is considered a joint VA loan and what is not, we’ll cover a few terms that you will encounter when applying for a joint VA loan.
Joint VA loans are separated into two different types. There are “veteran/nonveteran joint loans” and “two veteran joint loans”. While the names sound pretty self-explanatory, and indeed they mostly are, there are specific things covered under each that are good to outline. A veteran/nonveteran joint loan typically means a loan with one veteran and nonveteran that is not a spouse. However, this term is also used to cover any joint loan in which there is at least one veteran using his or her entitlement and at least one other person on the loan not using any VA entitlement. This other person can be a veteran or nonveteran, but cannot be a spouse of the veteran using his or her entitlement on the loan. A loan where three veterans are using entitlement and one nonveteran is also on the loan would be considered a veteran/nonveteran joint loan, as well as two veterans but only one of them using their entitlement.
A two veteran joint loan typically means two veterans that are not married to each other and are both using their entitlement. However, this can also mean a loan where the two spouses are both veterans and are both using their entitlement, and multiple veterans who are all using their entitlement. The principle here is that the term “two veterans joint loan” is used to represent any loan involving only veterans who will be using their entitlement. If all the parties are veterans but one or more is not using his or her entitlement on the loan, it is not considered a two veteran joint loan, but a veteran/nonveteran joint loan. If you’re unsure which one your situation would be considered, consult your lender.
The occupancy requirement on a VA loan is quite simple and is just an extension of the occupancy requirement on a normal VA loan. Any person that is using his or her entitlement on the joint loan must certify their intent to personally occupy the property as their home. A nonveteran on a joint loan does not need to certify their intent to occupy.