VA · 38 CFR 36.4308 and 36.4354VA joint loan: buying with a non-veteran co-borrower, and how title can be held

Veterans sometimes want to buy with a partner, sibling or friend who isn't a veteran. Under 38 CFR §36.4308, a VA-guaranteed loan to two or more borrowers who become jointly liable and will take undivided interests in the property – or a loan where the veteran's interest is only an undivided interest (other than at least 50% of a partnership) – requires VA's prior approval. The guaranty is then computed only on the portion of the loan allocable to the veteran, reflecting the veteran's proper contribution to the transaction. Spouses are treated differently: a veteran's spouse joining in the ownership doesn't require prior approval and doesn't limit the guaranty, which can be based on the entire loan; if both spouses are eligible veterans, either or both may use their entitlement within the maximums. On a joint loan, payments other than prepayments made expressly toward the veteran's portion are applied ratably to the veteran's and the other borrowers' portions, as are proceeds from a sale or liquidation. Title also has to fit VA's rules (§36.4354): the veteran's estate must be acceptable to informed buyers, title companies and attorneys in the community, and at least a fee simple estate; a leasehold that runs or is renewable for at least 14 years beyond the loan's maturity and is assignable; a life estate with the remainder and reversionary interests subject to the lien; or a beneficial interest in a revocable family living trust giving the veteran, or the veteran and spouse, an equitable life estate, if the lien attaches to the remainder and the trust is valid under state law. Encroachments, easements, servitudes and reservations of water, timber or subsurface rights don't make an estate unacceptable.