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 FHA
allows options where non-occupying family members can
co-sign to assist some borrowers in
qualifying when the intended occupying borrowers may not meet every guideline
requirement to qualify for the loan themselves.
FHA’s
non-occupant co-borrower options are perfect for a number of situations such as
these:
·
Occupying borrower is a college student with limited verifiable income for
qualifying purposes
·
Occupying borrower works for cash income
·
Occupying borrower has been self-employed for less than 24 months and thus has
non-allowable income for qualifying purposes
·
Occupying borrower recently made a complete change in employment field and has
non-allowable income for qualifying purposes
·
Occupying borrower has no credit and cannot provide non-traditional credit
sources
·
Occupying borrower recently received a large pay increase not consistent with
earnings history rendering income non-allowable for qualifying purposes
·
Occupying borrower is between
jobs or assignments rendering qualifying income not useable
·
Occupying borrower was recently discharged from military or is expected to be
discharged from military in near future and has not secured civilian employment
for qualifying income
·
Occupying borrower is
recently returning to the workforce after an extended leave of absence
 Maximum allowable financing may be utilized for transactions including
non-occupant co-borrowers when the subject property consists of one unit and
when the non-occupant is related to the occupying borrower by blood,
marriage or law. Additional longstanding family-type relationships
can be established and allowable for maximum financing as well. An example might
include a Godparent co-signing for a Godchild. When the non-occupying borrowers
are not related by any of the situations described above, loan-to-value is
limited to 75%.
All borrowers, whether intending to occupy the property or not, must sign the
note and mortgage and must be listed in title to the property. It is important
that the non-occupant borrower understands that he/she IS obligated on the
security instrument which means that if the occupying borrower happens to
default on the loan, the credit of the non-occupant borrower would also be
negatively affected.
 FHA does not specifically require qualifying of the occupying borrower however,
the occupying borrower indeed must have some
means of making timely mortgage payments. The bottom line is that the situation
must make sense. If there is any question whatsoever on the part of the
underwriter that the occupying borrower has no means whatsoever to accommodate a
housing expense or if the non-occupying co-borrower clearly reflects a portfolio
of investment properties, you can expect the file will be highly scrutinized and
may even be declined.
Non-occupant co-signors can be used
for purchase transactions but a little known fact is that FHA allows them in
some cases on refinances
as well. Non-occupant co-borrowers can be utilized on cash out refinances to 75%
LTV when the non-occupant is not related by blood, marriage or law. Those who
can prove blood, marriage or legal relation are eligible as non-occupant
co-borrowers up to 85% LTV. The LTV cannot exceed 85% on any cash out with a
non-occupant co-borrower being added for qualifying purposes.
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