Non-Occupant Co-Borrower Lending Guidelines On Home Loans

Non-Occupant Co-Borrower Lending Guidelines On Home Loans

This BLOG On Non-Occupant Co-Borrower Lending Guidelines On Home Loans Was PUBLISHED On January 23rd, 2019

what are Non-Occupant Co-Borrower Lending Guidelines On Home Loans

We have all heard of the situation where a family member helps cosign for a vehicle.

  • This may be due to having a higher credit score
  • Or getting a better overall rate
  • Or simply because the borrower cannot qualify by themselves
  • What many people do not know is; you can also use a “cosigner” to buy a home
  • This is call a “non-occupant co-borrower”
  • Now it is important to understand each loan programs qualifications for the use of non-occupying co-borrowers
  • We will detail more information throughout this blog

Keep in mind, many lenders have overlays where you are not allowed to use a non-occupying co-borrower. This is not the case with Gustan Cho Associates.

Non-Occupant Co-Borrower Lending Guidelines On VA Loans

what are Non-Occupant Co-Borrower Lending Guidelines On VA Loans

VA loans are an amazing loan program offered to those who serves our country.

  • We are experts in VA lending and support our Veterans with top notch customer service
  • VA loans are VERY STRICT on non-occupying co-borrowers
  • In basic terms, YOU CANNOT USE a non-occupying co-borrower
  • The VA does offer a “joint loan”, but this is seldomly used
  • This is when you use a co-borrower who is neither your spouse or a military member
  • The VA will only guarantee the mortgage for the veteran and not the co-borrower
  • Since the VA typically back 25% of the mortgage, to use a “joint loan”, you need a 12.5% down payment

Gustan Cho Associates are experts in all aspects of VA mortgages. Please call Mike Gracz directly on 630-659-7644 for more information on “joint VA loans”. Or text us for faster response. Or email Michael Gracz at [email protected]

Non-Occupant Co-Borrower Lending Guidelines On FHA Loans

what are Non-Occupant Co-Borrower Lending Guidelines On FHA Loans

Moving on to some better news, FHA does allow you to use non-occupying co-borrowers per HUD guidelines.

  • These guidelines are very black and white but unfortunately many loan officers do not understand them
  • There are down payment requirements when using two or more non-occupying co-borrowers
  • If they are not family members, you are required to put down 25%
  • If they are family members you are still allowed for the maximum 96.5% loan-to-value financing
  • Please note this does not hold true if you are buying a home from a family member or buying a two to four-unit property
  • If you are trying to obtain a loan and you do not have any reporting credit scores, and then needed to use a non-occupant co-borrower, the income of the non-occupant co-borrower will not be counted to your debt to income ratio
  • Same is true for Cash Out Refinance transactions
  • These last few sentences may sound confusing to you, please reach out to the experts at the Gustan Cho Associates!
  • You can reach Mike Gracz via phone or text on 630-659-7644 or text for faster response
  • Or via email on [email protected]
  • The 4000.1 handbook spells out requirements for a non-occupying co-borrower, in short, all qualifications are the same as the occupying borrower (Example; credit score, acceptable assets, how income is calculated)

One thing to keep in mind when asking a friend or family to be a non-occupying co-borrower is; they can still qualify for an FHA mortgage of their own, meaning they can buy a home for themselves with an FHA loan or already have an FHA loan.

Non-Occupant Co-Borrower Lending Guidelines On Conventional Loans

what are Non-Occupant Co-Borrower Lending Guidelines On Conventional Loans

Fannie Mae does allow non-occupant co-borrowers. Fannie Mae describes non-occupant borrowers as credit applicants on a principal residence transaction who;

  • Will not live in the subject property
  • Can have ownership interest in the subject property on title but is not required to be on title
  • Will sign the mortgage closing documents
  • Will have joint liability on the mortgage with the borrower(s)
  • Someone who is not involved in the transaction such as the property seller, builder, or even the real estate agent

As stated above the use of non-occupying co-borrower hours is allowed in common with conventional mortgages. In fact, Fannie Mae seems to advertise the use of non-occupant co-borrower hours for programs such as HomeReady. See below from https://www.fanniemae.com/content/fact_sheet/non-occupant-borrower.pdf

This diagram will show you how a non-occupant co borrower can add income to qualify for a conventional mortgage

Fannie Mae-non-occupant borrower Income Flexibility

Non-Occupant Co-Borrower Lending Guidelines On USDA Loans

what are Non-Occupant Co-Borrower Lending Guidelines On USDA Loans

USDA guidelines on non-occupant co-borrower are by far the easiest. They simply CANNOT BE USED.  there are no situations where you may use a non-occupant co-borrower for a USDA mortgage.

  • With home values and interest rates on the rise, we feel the use of non-occupant co-borrowers will rise in the calendar year of 2019
  • As you already know, we do not have any lender overlays to deal with and are able to use non-occupant co-borrower on any allowable loan program
  • We are always up-to-date on our mortgage guidelines and news

We are available 7 days a week to help with your unique situation.

Borrowers who need to qualify for mortgage with direct lender with no overlays on government and conforming loans, please contact The Gustan Cho Team at Loan Cabin Inc. at 630-659-7644 or text us for faster response. Or email us at [email protected]

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