You aren’t alone. Many people consider this, especially if they are unable to qualify for a loan on their own. A co-borrower helps the primary borrower qualify for the loan by using their income and/or assets to qualify for the loan.
The Non-Occupant Co-Borrower Guidelines
First, at least one borrower must occupy the property full-time. FHA loans are only for owner-occupied properties. In fact, you will sign a statement that says that you will occupy the property as your primary residence. You typically have 60 days to occupy the property. Not doing so could result in mortgage fraud.
Next, non-occupying co-borrowers must be a relative by blood or marriage. A blood relative would be a brother, sister, or parent. A relative by marriage could be step-parents or in-laws. There needs to be a documented relationship between the two of you. This does exclude any friends that may be willing personal bad credit loan North Dakota to be a non-occupying co-borrower. The only exception to this rule is friends that you have a long-standing relationship with that you can document. Typically, you must know the friend for at least 5 years and have proof of the relationship. (It’s rare to find a lender willing to let a friend be a non-occupant co-borrower).
The Credit Score Guidelines
Now, it’s time to dig into the qualifying guidelines of a non-occupant co-borrower. It’s not enough to know that your mother-in-law can be your non-occupant co-borrower. You need to know how her qualifications will affect your loan.
The first concern is the credit score. If you need a co-borrower to help you qualify for the loan because you have a high debt ratio or very little income, the lender will consider the co-borrower’s credit score. This is the highest concern. The lender will use the lowest credit score of the borrowers. Lenders usually use the middle credit score of each borrower. In other words, they pull all three credit reports, determine which score is the ‘middle score’ and compare that score to the other borrowers. Continue reading “Are you considering applying for an FHA loan with a non-occupying co-borrower?”