Mortgages With Non-Occupying Co-Borrowers

Many times in order to qualify for a mortgage loan the person occupying the home may not qualify for the mortgage on their own. In many cases a Non-Occupying Co-Borrower can be added to the mortgage loan so that the occupant has enough income and assets to qualify for the loan. Fannie-Mae, Freddie-Mac, and FHA all offer these types of programs. Though with the Fannie-Mae program the borrower must meet the qualifying debt to income ratios on their own. Thus, this program is not likely to be used as for the most part it defeats the purpose of using non-occupying co-borrowers on a mortgage transaction.

The FHA Non-Occupying Co-Borrower is the most liberal of all the programs. When the Non-Occupying Co-Borrower (s) are related to the borrowers by marriage, blood or law which includes parents, siblings, grandpparents, uncles, aunts, nieces, nephews, and step-relationships FHA only requires a 3.500% down-payment.

One unique feature of the FHA Non-Occupying Co-Borrower program is that they also allow for Non-Occupant Co-Borrowers that are not related in any above manner to be on the mortgage loan. When the Non-Occupying Co-Borrowers are not related to the borrowers the mortgage requires a 25% down-payment to qualify. They must also have some type of document-able long-relationship to the borrowers. For example, a long-time family friend or co-worker, employer of the borrower of the mortgage loan. Be prepared to fully document the relationship in these types of cases as FHA wants to make sure that people are not being used as straw-borrowers for illegitimate or fraudulent purposes.

As stated above in the opening paragraph to this informative post for conforming loans both Fannie-Mae and Freddie-Mac allow for Non-Occupant Co-Borrowers. Though with Fannie-Mae the borrowers must qualify on their own with regards to debt ratios. Thus, we will not discuss the Fannie-Mae program, but rather focus on the Non-Occupant Co-Borrower program offered by Freddie-mac.

Freddie-Mac differs from FHA both in that the Non-Occupant Co-Borroers must be realted to the occupants of the home, and the Freddie-Mac program requires a larger down-payment than the FHA program. In addition, the Freddie-Mac program will not have the up-front Mortgage Insurance Premium that you will find with the FHA mortgage program.



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