Freddie Mac Non-Occupant Co-Borrower Guidelines
This ARTICLE On Freddie Mac Non-Occupant Co-Borrower Guidelines Was PUBLISHED On August 20th, 2019
Fannie Mae and Freddie Mac Non-Occupant Co-Borrower Guidelines allow non-occupant co-borrowers to be added to the main borrower in qualifying for conventional loans.
- The Automated Underwriting System (AUS) will recognize this and is often not viewed as a positive factor
- Freddie Mac Non-Occupant Co-Borrower Guidelines allow non-occupant borrowers for both purchase and refinance transactions
- Although Non-Occupant Co-Borrower Guidelines allow non-occupant co-borrowers on conventional loans with over 80% LTV, some private mortgage insurance may not allow this as part of the PMI Overlays
- Gustan Cho Associates has no lender overlays and will just go off the Non-Occupant Co-Borrower Guidelines
- Borrowers with over 80% loan to value can add non-occupant co-borrowers to qualify on conventional loans
In this article, we will discuss and cover Non-Occupant Co-Borrower Guidelines on conventional loans.
Freddie Mac Non-Occupant Co-Borrower Guidelines Versus PMI Overlays
Until recently, it was difficult in adding non-occupant co-borrowers on conventional loans for borrowers with loan to value higher than 80%.
- This was due to private mortgage insurance companies not insuring borrowers with non-occupant co-borrowers who had less than 20% in equity
- However, many PMI companies eased the LTV requirements for borrowers with higher credit scores and strong credit profiles
- Most PMI companies prefer 95% LTV conventional loans versus 97% LTV when adding non-occupant co-borrowers
This benefits borrower who may not have enough qualified income to qualify for conventional loans.
Freddie Mac Non-Occupant Co-Borrower Guidelines And Eligibility Requirements
Below are the Freddie Mac Non-Occupant Co-Borrower Guidelines And Eligibility Requirements On Conventional Loans:
- Need to be an owner-occupant primary home
- Need to be a single-family home which includes townhomes and/or condos
- Manufactured homes, co-ops, and homes sitting on over 10 acres are not eligible
- Both the main borrower and/or all non-occupant co-borrowers may not own more than four financed properties
- The above includes properties owned in an LLC and/or partnership
- The main borrower need to occupy the primary residence within 60 days after the home closing
- All borrowers need to have at least two credit scores
- All borrowers will need to have a 660 credit score
- The lower middle credit score of all borrowers will be used as the qualifying credit score
- Maximum debt to income ratio allowed on conventional loans is 50% DTI
However, most private mortgage insurance companies prefer DTI of no greater than 45% DTI when non-occupant co-borrowers are added to the main borrower unless the borrowers’ credit scores are over 700 FICO.
Freddie Mac Non-Occupant Co-Borrower Guidelines On Relationship To The Main Borrower
There can be more than one non-occupant co-borrower.
- The non-occupant co-borrower does not have to be related to the main borrower
- HUD, the parent of FHA, requires that all non-occupant co-borrowers be related to the main borrower by law, blood, and/or marriage on 3.5% down payment home purchase FHA Loans
- HUD does allow non-occupant co-borrowers not to be related to the main borrower
- However, if not related, then 25% down payment is required on FHA Loans
Both Fannie Mae and Freddie Mac can have non-relatives added on to the main borrower as co-borrowers.
Main Borrower Contribution
Freddie Mac Non-Occupant Co-Borrower Guidelines require if the LTV is higher than 80%, the main borrower needs to make the first 3% down payment from the occupant borrower’s own funds.
- Joint Co-borrower’s funds if they are owner-occupants are considered the main borrower funds
Gifted funds are allowed on conventional loans. However, the Automated Underwriting System does not view gift funds favorably.
For more information about the contents of this article and/or other mortgage-related topics, please contact us at Gustan Cho Associates at 262-716-8151 or text us for faster response. Or email us at firstname.lastname@example.org. The team at Gustan Cho Associates Mortgage Group is available 7 days a week, evenings, weekends, and holidays.