VA Home Loan Policy For Loans Between Two Veterans
VA loan approval processes will move faster for those applying for home loans with other veterans, thanks to changes in VA home loan policies that also improve processing times for certain disabled veterans.
The Department of Veterans Affairs frequently updates its policies, and those for VA loans are no exception. Many of those updates are procedural, but some less common changes, like the ones discussed below, directly affect how specific VA mortgage applications are approved.
Past VA Home Loan Approval Policy
In the past, the VA required a “pre-closing review” of VA loan applications when the borrower “has a VA-appointed fiduciary.” This review was also required when “a loan would include more than one Veteran using entitlement.”
The old pre-closing review stopped the loan process until a VA representative could review the loan, approve it, and send it back to the loan officer for final processing.
These aren’t the only loans that have required the VA’s review and approval before sending back to the lender. Others include:
- Loans to veterans in receipt of VA non-service-connected pension;
- Joint loans to a veteran and non-spouse, non-veterans;
- Joint loans to a veteran and non-spouse veterans not using VA entitlement;
- Interest Rate Reduction Refinancing Loans to refinance delinquent VA loans.
Under updated VA loan rules, the pre-closing review for the loan types in the list above do NOT change. But where the new rules apply, the VA loan approval process becomes far more efficient.
Read more: VA Loan Basics
“VA Appointed Fiduciary” Explained
One of the types of loan applications affected by the rule change? Those where the applicant has a VA-appointed representative to help with their benefits.
VA home loan rules do not mention this specifically, but VA loan rules in this area seem to address VA loan applications from veterans with disabilities that require using third-party help for personal finances or specific aspects of them (like VA benefits.)
The VA rulebook describes these applicants as those with an “inability to manage financial affairs (that is, one for whom VA has appointed a fiduciary).” VA loan policy updates described below improve the processing times for these loan applications.
Joint Loans Explained
The VA joint loan situation mentioned above applies when two or more borrowers use their VA Loan benefit to buy a home together. Each veteran or service member uses a portion of their VA loan entitlement, and each is equally responsible for the loan.
It is important to note that when a married couple buys a home together, VA loan rules are different than if veterans and non-veterans who are not married do so.
On Veterans and Non-Veterans Buying a Home Together
Under VA loan rules for both joint loans and non-joint loans, each veteran borrower is responsible for their share of the loan and uses their share of the VA loan entitlement to be approved for it.
When a veteran and non-veteran borrow, the VA covers only the veteran’s portion of the loan…unless they are married. Then, the VA guarantee is for the whole loan up to the VA limit.
As we can see from the above, sending certain kinds of joint loans to the VA for final approval has been a practice for some time.
Read more: How to Use a VA Mortgage
Updated VA Home Loan Policy Explained
Updated VA loan policy for joint loans with two or more veterans, and for loans requiring the help of a VA fiduciary, now permits VA lenders authorized to make “Prior Approval” loans with no pre-closing review by the VA or the delays that review causes.
No pre-closing review means these loans can be processed similarly to most other VA mortgages. The lender reviews the application, pulls credit reports, determines borrower creditworthiness, and approves or denies the loan at the local level. There is no waiting for the VA to get to your loan transaction to review it.
These changes in VA requirements do NOT apply to other types of joint loan, VA IRRRLs made to refinance delinquent mortgages or other types of loans that typically require a review by the Department of Veterans Affairs prior to loan closing.
About the author
Joe Wallace is a 13-year veteran of the United States Air Force and a former reporter/editor for Air Force Television News and the Pentagon Channel. His freelance work includes contract work for Motorola, VALoans.com, and Credit Karma. He is co-founder of Dim Art House in Springfield, Illinois, and spends his non-writing time as an abstract painter, independent publisher, and occasional filmmaker.