The Federal Housing Administration allows non-occupant co-borrower to be added to the FHA mortgage loan borrower in order to qualify for a FHA insured mortgage loan. The non-occupant co-borrower needs to be a family member or related to the FHA mortgage loan borrower by blood, legal status, or marriage. The non-occupant co-borrower needs to qualify under FHA mortgage lending guidelines and if the non-occupant co-borrower has a bankruptcy, foreclosure, deed in lieu of foreclosure, and/or short sale, the same waiting period applies. The non-occupant co-borrower needs wait two years after a discharge date of a bankruptcy if he or she had filed a prior bankruptcy. The non-occupant co-borrower needs to wait 3 years from the recorded date of foreclosure or deed in lieu of foreclosure if they had a prior foreclosure or deed in lieu of foreclosure. The non-occupant co-borrower needs to wait three years from the HUD’s settlement date if they had a prior short sale. The non-occupant co-borrower is not on title and only on the mortgage loan.
Will Non-Occupant Co-Borrower Be Able To Purchase A Home Later?
If you are a non-occupant co-borrower and you are not a homeowner and are wondering by co-signing for a family member will affect your chances of buying a home of your own later, the answer is no. By being a non-occupant co-borrower, you can still qualify for a mortgage loan on your own with the debt that you co-signed not affecting you. How can this be? Your future mortgage lender will not take into account the co-signed mortgage liability if and only if you can provide them with the main borrower’s 12 months cancelled checks to the mortgage company he or she has been making payments to. Although it is on your credit report, the future mortgage lender will not count it as your liability as long as you can provide them with the cancelled checks from the person you have cosigned. Unfortunately, if the person you have co-signed for has been late on their mortgage payments, it will affect your credit scores negatively.
Non-Occupant Borrower With No Credit Scores
Sometimes a FHA insured mortgage loan borrower will have a non-occupant co-borrower with no credit scores. Non-occupant co-borrowers with no credit scores are allowed only if they have 12 months rental verification. As long as the non-occupant co-borrower has twelve months cancelled checks paid to the landlord and has no credit scores, there is no problem.
What If Non-Occupant Co-Borrower Has Bad Credit?
If the non-occupant co-borrower has bad credit, it can pose a problem. To qualify for a FHA insured mortgage loan with only a 3.5% down payment, the minimum credit score required is 580 FICO. In the event if the non-occupant co-borrower has a credit score below 580 FICO, the mortgage loan originator can possibly help them boost their credit scores up so it surpasses the 580 FICO mark. There are some quick fixes to boost up the credit scores and a rapid rescore can be done.
By Gustan Cho