If you’re looking to buy a home with someone who is not your spouse, you may wonder if you qualify for an FHA loan. The answer is yes – as long as you meet the requirements.

In this blog post, we will discuss the FHA Non-Occupant Co-Borrower Guidelines. We will cover who is eligible, the requirements, and how to apply.

If you’re considering buying a home with someone other than your spouse, this blog post is for you!

Non-Occupant Co-Borrower: What Does It Mean?

An FHA non-occupying co-borrower is an individual who cosigns with the applicant on a mortgage loan, but they aren’t an occupant of the property. This individual typically provides income qualifications to help the applicant qualify for a higher loan or rate.

Most lenders require the non-occupying borrower to sign all loan documents, such as a promissory note and security instrument, before disbursing any payment. Therefore, the primary benefit of having a non-occupant co-borrower is that it can increase your chances of obtaining a lower interest rate on your home purchase.

While this option may appear attractive, there are potential drawbacks, including increased liability for both parties if you miss payments or go into foreclosure. Therefore, it’s essential to carefully understand and weigh both pros and cons before taking on this type of financial obligation.

How Co-Borrowing Works For An FHA Loan

Having a co-borrower on an FHA loan makes your mortgage application much more likely to be accepted. It is because a co-borrower with income and an established credit score guarantees the primary borrowers that they will pay the mortgage if they cannot.

Co-borrowing is beneficial because it allows multiple people, such as parents and their adult children, to purchase a home together. However, the co-signer should also meet all eligibility criteria, just like the primary borrower, so it’s essential to research the requirements before joining forces with someone else.

Generally, If the primary borrower on a debt fails to make a payment, the co-borrowers are responsible for that debt and liable. Despite this additional risk, co-borrowing can be a relatively simple way to access more financing and qualify for better loan terms with an FHA loan.

FHA Non-Occupant Co-Borrower Guidelines

The Federal Housing Administration (FHA) offers mortgage loans to help people become homeowners. One specific loan program allows certain borrowers to have a non-occupant co-borrower.

It provides additional benefits that can help increase the likelihood of obtaining a loan and being able to afford it. Specific requirements must be met for a non-occupant co-borrower to be added to a loan application.

The primary borrower and the non-occupant co-borrower must both have reasonable credit histories and meet the income requirements of the loan program. In addition, the primary borrower will need to demonstrate their ability to make all payments on the loan, while the co-borrower will need to demonstrate that they can make payments on the loan if required.

The non-occupant co-borrower must also be able to prove their relationship to the primary borrower, usually through a joint tax return or other legal documents. In addition, both parties must sign all loan paperwork, and the non-occupant co-borrower must also sign a statement affirming their understanding of the risks associated with being on loan.

The inclusion of a non-occupant co-borrower on an FHA loan can provide benefits to both parties. For the primary borrower, adding a co-signer can improve their chances of loan approval and make qualification easier. For the co-borrower, it can help to establish a credit history and increase their chances of obtaining financing in the future.

If you’re considering adding a non-occupant co-borrower to your FHA loan application, it’s essential to understand all of the guidelines and potential risks before proceeding. With the correct information and careful consideration, it can be a viable option for those who qualify.

Who Is Eligible For An FHA Non-Occupant Co-Borrower Loan?

Both borrowers must meet specific criteria to qualify for an FHA Non-Occupant Co-Borrower loan.

The Primary Borrower Must

• Have a minimum credit score of 580 or higher

• Have a steady income

• Have proof of employment

• Submit income and tax documents

The Co-Borrower Must

• Be related to the primary borrower by blood, marriage, or law

• Be a lawful permanent resident or a US citizen

• Provide proof of income and assets

• Have a minimum credit score of 580 or higher

How to Apply for an FHA Non-Occupant Co-Borrower Loan

The process of applying for an FHA Non-Occupant Co-Borrower loan is similar to that of a traditional mortgage. In addition, you must provide income and tax information, credit scores, and other documentation.

Once you have gathered all the necessary documents, you must complete and submit a loan application. The lender will then review your application and may request additional information.

Once approved for the loan, you must sign all necessary documents, such as the promissory note and security instrument, before any funds will be disbursed.

Benefits Of Adding Non-Occupant Co-Borrower To The Loan

The primary benefit of having non-occupant co-borrowers on an FHA loan is that it allows those with lower credit scores and less income to qualify for the purchase. It also makes getting a better loan rate more accessible since the lender will see two incomes rather than just one.

Having someone with a higher credit score on a loan will also make it easier to qualify since their credit score can be used to offset any deficiencies in the primary borrower’s score. It is especially beneficial for first-time home buyers or those with limited credit history.

Additionally, having non-occupying co-borrowers may help you qualify for more significant FHA loans than you could get. It can make purchasing a more expensive home easier and have the cash reserves needed for closing costs and other expenses.

Generally

FHA Non-Occupying Co-Borrower loans are an excellent way for individuals to purchase a home with someone who is not their spouse. However, it’s essential to understand the requirements and potential drawbacks before entering such an arrangement. 

By following these FHA guidelines, you can ensure that you and the co-borrower are both eligible for a loan transaction and have the best chance of success. Once approved, you can move forward with confidence in your decision and begin finding your dream home.

FAQs

Why is it important that Non-occupying co-borrowers must have a principal residence?

Non-occupying co-borrowers must have a principal residence to demonstrate their commitment to the loan and prove that they are financially stable. In addition, it helps protect both the lender and the primary borrower as it ensures that all parties involved in the loan understand their responsibilities.

Can a family member be a co-borrower?

Yes, a family member can be a co-borrower. However, they must still meet the FHA’s eligibility requirements, such as having a minimum credit score of 580 and providing proof of income and assets.

Is it necessary to have a loan officer to get an FHA Loan?

No, it is unnecessary to have a loan officer to get an FHA loan. However, it can be beneficial as they can provide guidance and assistance.

They can also help you find a lender that fits your needs and advise on the best ways to prepare for the loan application process.