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NON-Occupant Co-Borrowers Mortgage Guidelines

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This BLOG On NON-Occupant-Co-Borrowers Mortgage Guidelines Was Published On December 21st, 2018

Many times, when our clients attempt to qualify for a mortgage, debt to income ratio can be a hurdle.

  • To get over this hurdle you either need to pay off debt or make more money
  • But there are a few other solutions
  • Many clients find themselves adding a non-occupying co-borrower to their mortgage loan
  • In theory it is like having a cosigner for an auto loan
  • But they are not required to occupy the property
  • In this blog we will go over the rules and regulations for non-occupying co-borrower hours with both FHA and conventional financing
  • The most common non-occupying co-borrower we see are parents of one of the Borrowers on the mortgage application
  • Let’s face it, your parents have done a lot for you over the years and they may be able to help you qualify for your dream home

NON-Occupant-Co-Borrowers Mortgage Guidelines On Conventional Loans

Non-occupying co-borrower and conventional loans:

A common misconception in the mortgage industry is  conventional loans do not allow non-occupant co-borrowers.  

  • If you were told you cannot use a non-occupying co-borrower with a conventional loan, you are dealing with a lender overlay
  • Gustan Cho Associates do not have any additional overlays on conventional mortgages
  • Meaning we do allow the use of a non-occupant co-borrower on conventional mortgages
  • Per Fannie Mae, there are rules of who can be anon-occupying co-borrower
  • Fannie Mae defines a non-occupying co-borrower as someone who:
  • Does not and will not occupy the subject property
  • Will sign the mortgage and all proper documents such as deed of trust or note
  • Does have joint liability with the mortgage and the borrowers
  • Cannot have relations to the transaction. Meaning they cannot be the seller of the property, the builder, or the real estate broker
  • Non-occupying co-borrower mayor may not have ownership interest as documented on the title to the home

When utilizing a conventional loan with a non-occupying co-borrower, AUS findings will be ran for approval (see our AUS BLOG for more details). The AUS will analyze credit, income, and assets for both parties. If you are using a non-occupying co borrower, you must put down at least 5% (unless using a specialty program). Per Freddie Mac, the funds for down payment can come from either borrower’s or non-occupying co-borrower’s account, or both.

HUD NON-Occupant-Co-Borrowers Mortgage Guidelines

Non-occupying co-borrower and FHA loans:

FHA mortgages and non-occupying co-borrower where’s have a few strange quirks. We will dive into those in more detail now.

FHA DOES allow the use of non-occupying co-borrowers per HUD NON-Occupant Co-Borrowers Mortgage Guidelines.

  • In fact, you can even have 2 non-occupying co-borrowers!
  • They are added to the application and are not going to live in the subject property
  • Within the AUS approval, their income and assets will be added to the loan similar to Conventional mortgages
  • The same is not true for certain manually underwritten FHA loans
  • For instance, if you do not have a credit score, you can still obtain an FHA loan
  • Not having a credit score will require a manual underwrite, and in this situation the income from a non-occupant co-borrower will not be added to your overall debt to income qualifications
  • Per the HUD 4000.1, when there are two non-occupying co-borrowers, you will need a 25% down payment
  • Unless the non-occupying co-borrowers are family members
  • HUD’s definition of a family member is:
  • Someone related by blood, marriage, or law
    • Parents
    • Siblings
    • Stepchildren
    • Aunts/Uncles
    • In some cases, close family friends (with proper documentation)

When completing a cash out refinance using an FHA loan, the income from anon-occupying co-borrower will NOT be used for qualification purposes. This is a well-known fact for a loan officer who knows their guidelines. But many loan officers are not up to speed like the Gustan Cho Associates.

Real quick, we will dive into VA mortgage guidelines regarding non-occupying co-borrowers. At this time, you cannot use a non-occupying co-borrower for VA mortgages. There are joint-loans available through the VA, but those are only for family members who will be occupying the property.


As you can see every loan program is slightly different. Please reach out to the Gustan Cho Associates for more detail. It is important to select a loan officerwho is up-to-date on all mortgage guidelines. For direct assistance please call Mike Gracz on 630-659-7644. I will be available to answer any question 7 days a week. You can also email me on mgracz@gustancho.com.

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