Multiple Non-Occupant Co-Borrowers FHA Mortgage Guidelines

This Article Is About Multiple Non-Occupant Co-Borrowers FHA Mortgage Guidelines

HUD, the parent of FHA, allows borrowers to add non-occupant co-borrowers if the main do not qualify with income. Adding non-occupant co-borrowers is only allowed with FHA and conventional loans. Fannie Mae Conventional Loans does allow non-occupant co-borrowers. Freddie Mac does allow non-occupant co-borrowers to be added to conventional loans. However, Fannie Mae and Freddie Mac do not require non-occupant co-borrowers to be related by law, marriage, blood on conventional loans. VA and USDA loans do not allow non-occupant co-borrowers.  VA only allows married spouses to be added as co-borrowers. Non-occupant co-borrowers need to be family members or relatives and be associated with main borrowers by blood, marriage, or law on FHA loans but not on conventional loans. In this article, we will discuss and cover adding Non-Occupant Co-Borrowers.

Eligible Non-Occupant Co-Borrowers

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For example, the following would be eligible non-occupant co-borrowers on FHA Loans:

• parents
• step-parents
• brothers
• sisters
• aunts
• uncles
• grandparents
• children
• stepchildren

Be added as non-occupant co-borrowers on FHA Loans:

• Non-occupant co-borrowers will go on the mortgage loan, but not on the title to the property

Non-occupant co-borrower will need to provide all income, liability, and asset information to the mortgage lender.

Non-Occupant Co-Borrowers Qualifications

To be qualified as non-occupant co-borrowers for FHA Loans, borrowers need to be family members and/or relatives to the mortgage loan borrower related by blood, marriage, or law. Adding on non-occupant co-borrowers who are related by blood, law, marriage enables homebuyers to qualify for FHA Loans with a 3.5% down payment:

• In order to qualify as non-occupant co-borrowers, they need income
• For example, if the non-occupant co-borrower is currently living with family and/or friends and is living rent-free, that person can qualify as co-borrowers
• HUD, the parent of FHA, will allow non-relatives to be non-occupant co-borrowers

However, if non-occupant co-borrowers are not related to main borrowers by law, blood, marriage, then a 25% down payment is required.

Cases When AUS Conditions Verification Of Rent

Rental verification is only valid if the non-occupied co-borrower pays their landlord with a check every month and provides 12 months of canceled checks paid to the landlord. There are instances where the Automated Underwriting System Findings may condition verification of rent for borrowers and/or co-borrowers. Bank wires from the non-occupant co-borrower to the landlord are allowed as long as the non-occupant co-borrower can provide 12 months bank statements of funds being withdrawn from their bank account to the landlord’s bank accounts. A verification of rent, also known as a VOR, is required as well, which is a statement signed by the landlord attesting that the tenant has been paying rent timely in the past 12 months with no late payments. If the non-occupant co-borrower is renting their home or apartment from a registered property management company, a letter from the manager is sufficient as proof of verification of rent. VOR Form completed and signed by the property manager can be used in lieu of providing canceled checks and/or bank statements.

Will Being A Non-Occupant Co-Borrower Affect In Getting A New Mortgage In The Future?

Being a non-occupant co-borrower will not affect the non-occupant co-borrower with their debt-to-income ratios after 12 months.

For example, here is a case scenario:

• If the non-occupant co-borrower is a renter
• wants to qualify for a mortgage loan after one year
• the non-occupant co-borrower needs to provide 12 months canceled checks from the main borrower proving that they not responsible for the mortgage payment
• Doing so the debt of being a non-occupant co-borrower will not count and be exempt 

The risk that arises from being a non-occupant co-borrower is that if the main borrower is late on their mortgage payment, it will affect their credit payment history and credit scores on their credit report.

Can Borrowers Have More Than One Non-Occupant Co-Borrowers?

The Federal Housing Administration allows for more than one non-occupant co-borrowers to be added to the main borrower’s FHA Loan to qualify for income.

• Borrowers can have both parents added as non-occupant co-borrowers to qualify for an income
• Or they can have a brother and/or sister as well as their spouse as non-occupant co-borrowers

Home Buyers who need to qualify for a mortgage with a five-star mortgage company licensed in multiple states with no lender overlays on government and conventional loans can contact us at Gustan Cho Associates at 800-900-8569 or text us for a faster response. Or email us at gcho@gustancho.com. Gustan Cho Associates has zero lender overlays on FHA, VA, USDA, and Conventional loans. Gustan Cho Associates are also correspondent lenders on non-QM loans and bank statement mortgage loans for self-employed borrowers.