VA Loan Title Restrictions
It's no secret that the home-buying process can be a long and daunting task. Between discovering the perfect home, applying for a VA loan, and making it to the closing table, there are countless steps involved with purchasing property.
One aspect of purchasing a home often overlooked is VA home title requirements. A home's title is a document proving ownership of the property, and VA loans have their own added layer of conditions compared to other lending types.
If you want to go the VA route for your home loan and need to know who can be on the title, you're in luck! We've done all the research, so you don't have to.
In addition to proving ownership, a home title also sheds light on any liens or encumbrances involved with the property. As such, the only people that can be listed on a VA loan title are co-borrowers, who are considered equally responsible for making loan payments and share in the home’s equity. Standard VA loan terms apply to the following co-borrowing scenarios:
Co-borrowing with a non-spouse, non-Veteran resident is also an option, but you will need to find a lender who accommodates this type of joint VA loan.
Whether someone can co-borrower on a VA loan will depend on that person's financial eligibility.
People often use these terms interchangeably, but you should know that a co-borrower on a VA loan is not the same as a co-signer.
VA loan co-signers can help Veteran borrowers qualify by guaranteeing to take on the debt burden if the Veteran borrower defaults on their mortgage payments. Co-signers are not added to the loan title because they are not responsible for making loan payments unless you default.
As mentioned above, VA loan co-borrowers are added to the title. They benefit from shared equity of the home and are responsible for making mortgage payments.
What VA loan co-borrowers and co-signers share in common are the financial and occupancy requirements they must meet to be considered eligible.
The short answer is 'yes.' The VA doesn't assign regulations regarding title insurance; however, individual VA lenders typically require it.
Title insurance exists to provide the lender and borrower peace of mind in case of any errors with the property's title. Although it is an added expense, title insurance offers protection against unexpected occurrences regarding the title, such as issues with public records or unrevealed liens.
While shopping around with VA lenders, it's a good idea to ask each one about their policy regarding title insurance and how much they expect you to pay.
While the VA leaves title requirements up to lenders, they may withhold the approval of a property if the title's condition leads to the risk of loan default.
The VA will also not approve loans restricting a VA borrower's ability to sell the property. For most kinds of residential properties, this should not be an issue. However, if the Veteran is interested in buying a condo, duplex, or any other community-living property, they may encounter roadblocks.
This can be tricky, so let's work through an example. If the Veteran borrower is looking to buy a condo with a VA loan, they should know that some condominium buildings have a clause in their paperwork known as "right of first refusal." These clauses place limitations on unit owners' rights for resale. Such clauses go against the VA's requirement because they give condominium projects the right to repurchase a unit from a buyer even if they want to sell to someone else.
A VA loan is a great way for many Veterans to achieve their goal of home ownership, but it's important to know the ins and outs of the process. Knowing who can be on the title of a VA loan is one of the first steps to a smooth home-buying journey.
