All people's credit is considered - meaning that the worst credit situation of all borrowers still has to be able to pass guidelines... as well as it also means that someone who has excellent credit can make an underwriter feel more comfortable about the loan request than if only the person with bad credit was applying. But someone with excellent credit will not make the underwriter overlook the person who has bad credit.
However VA loans have varying requirements when there is more than 1 borrower on the loan, because it depends on what everyone's relationship is to each other, as well as if there are families going on the loan who are not veterans. A question similar to yours was just asked at http://www.trulia.com/voices/Financing/Looking_for_lenders_o
My question to them, slightly rephrased to fit your situation, is:
How many people would actually be applying for the mortgage (be borrowers on the mortgage) in the situation you are describing?
If it's a veteran (like your daughter, or her husband is a veteran) & their spouse (who is a non-veteran, or who is a veteran but not using their VA entitlement) AND you or your wife are a veteran then it can be processed like a normal VA loan, with up to 100% financing/no down payment being available.
However if it's a joint loan with the veteran & another non-veteran (not spouse), or other situations, then a down payment could be required on the non-guaranteed portion. This may be difficult to understand, but VA will only guaranty 25% of the veterans portion of the loan - so if it's a veteran, their spouse, and then two other non-veterans (like you are a veteran, but your daughter or her husband is not), then VA will only guaranty the veteran's portion of the loan. Lenders require that VA guarantees 25% of the loan in order for there to be no down payment requirement, otherwise a 25% down payment is required on the non-guaranteed portion.
So if you are a veteran but your daughter (nor her spouse) is a veteran, then in the situation where you are purchasing a home, a 16.666% down payment would be required on the sales price ... i.e. on a $100k sales price, a $16,666 down payment would be needed ... because if only $33k is guaranteed (you and your wife's portion), then 25% of the remaining $66k equals $16,666. Confused yet? If not, then that is great... but if you are, then don't worry because this is fairly complicated stuff. And if you are confused, then ask more questions about whatever exactly you are confused about.
Shane Milne | Lending in all 50 states | NMLS #81195