A non-occupying co-borrower is an individual who shares the responsibility for mortgage repayments with the primary home buyer without residing in the property (https://homebuyer.com/learn/non-occupant-co-borrower). This arrangement is similar to a mortgage co-signer, providing additional financial support and improving the primary borrower’s chances of loan approval (https://www.rocketmortgage.com/learn/fha-non-occupant-co-borrowers).
Key Facts
- Role: A non-occupying co-borrower is similar to a mortgage co-signer, as they share the responsibility for mortgage repayments with the primary home buyer.
- Mortgage Approval: Including a non-occupying co-borrower in the mortgage application can improve the primary borrower’s chances of getting approved for a loan, especially if the co-borrower has a higher income or better credit score.
- FHA Loans: The Federal Housing Administration (FHA) allows non-occupant co-borrowers on FHA loans. One borrower must live in the home as their primary residence, but the co-borrower can be someone who does not live in the home.
- Eligibility: Non-occupying co-borrowers must meet certain requirements, such as having a valid social security number, a history of employment, residence, and credit, and not being ineligible for an FHA loan.
- Credit Score: The credit score requirements for non-occupying co-borrowers vary depending on the type of loan. For FHA loans, a credit score of 580 or above is eligible for maximum financing.
- Down Payment: The minimum down payment for FHA loans with a non-occupant co-borrower is 3.5 percent. The down payment can be made by the non-occupant co-borrower directly to avoid issues with down payment gifts.
- Other Loan Options: Non-occupant co-borrowers can also be included in mortgage loans backed by Fannie Mae and Freddie Mac. These loans have their own eligibility requirements and down payment rules.
Eligibility Requirements
Non-occupying co-borrowers must meet specific eligibility criteria (https://www.madisonmortgageguys.com/non-occupying-co-borrower/):
- Possess a valid social security number
- Demonstrate a history of employment, residence, and credit
- Not be ineligible for an FHA loan
Credit Score Requirements
The credit score requirements for non-occupying co-borrowers vary based on the loan type (https://www.rocketmortgage.com/learn/fha-non-occupant-co-borrowers):
- FHA loans: A credit score of 580 or above qualifies for maximum financing.
- Fannie Mae and Freddie Mac loans: Eligibility requirements and down payment rules vary.
Down Payment Requirements
The minimum down payment for FHA loans with a non-occupying co-borrower is 3.5 percent (https://www.rocketmortgage.com/learn/fha-non-occupant-co-borrowers). The non-occupying co-borrower can directly contribute the down payment to avoid issues with down payment gifts.
Benefits of Using a Non-Occupying Co-Borrower
Including a non-occupying co-borrower in the mortgage application can provide several benefits:
- Improved loan approval chances for the primary borrower due to the co-borrower’s higher income or better credit score.
- Reduced interest rates and more affordable housing costs for the primary borrower.
- Assistance for young home buyers or individuals with student loan debt or negative credit marks.
Conclusion
Non-occupying co-borrowers can be a valuable resource for individuals seeking homeownership. By understanding the eligibility requirements, credit score requirements, and down payment options, borrowers can determine if this arrangement is suitable for their financial situation.
Sources
- What is a Non-Occupant Co-Borrower?
- FHA Non-Occupant Co-Borrowers: Guidelines And How They Can Help
- Non-Occupying Co-Borrower Mortgage Guidelines: FHA, Fannie Mae & Freddie Mac
FAQs
What is a non-occupying co-borrower?
A non-occupying co-borrower is an individual who shares the responsibility for mortgage repayments with the primary home buyer without residing in the property.
What are the benefits of using a non-occupying co-borrower?
Benefits include improved loan approval chances, reduced interest rates, and more affordable housing costs for the primary borrower.
Who can be a non-occupying co-borrower?
Non-occupying co-borrowers must meet certain eligibility criteria, such as having a valid social security number, a history of employment, residence, and credit, and not being ineligible for an FHA loan.
What are the credit score requirements for non-occupying co-borrowers?
Credit score requirements vary based on the loan type. For FHA loans, a credit score of 580 or above qualifies for maximum financing.
What are the down payment requirements for FHA loans with a non-occupying co-borrower?
The minimum down payment for FHA loans with a non-occupying co-borrower is 3.5 percent.
Can non-occupying co-borrowers be included in mortgage loans backed by Fannie Mae and Freddie Mac?
Yes, non-occupying co-borrowers can also be included in mortgage loans backed by Fannie Mae and Freddie Mac, but these loans have their own eligibility requirements and down payment rules.
What are the eligibility requirements for non-occupying co-borrowers on FHA loans?
In addition to the general eligibility requirements, non-occupying co-borrowers on FHA loans must be a family member of the primary borrower, such as a child, parent, or sibling.
Can non-occupying co-borrowers have an ownership interest in the property?
No, non-occupying co-borrowers cannot have an ownership interest in the property.