What are the LTV Requirements When a Loan has a Non-Occupying Co-Borrower?
This Article On Non-Occupant Co-Borrower Mortgage Guidelines On Home Loans
FHA and Conventional loans are the two most popular home mortgage programs in the nation that allow non-occupant co-borrowers to be added to the main borrower on a home purchase and/or refinance mortgage.
There are three government-backed mortgages:
- FHA loans
- VA loans
- USDA loans
Government-backed mortgages are for owner-occupant homes only. You cannot finance second homes and/or investment properties with government-backed loans. One of the hurdles facing many homebuyers is running into high debt to income ratio. This holds especially true for homebuyers with large student loan balances, self-employed borrowers, or borrowers with cash income. Lenders are very strict when it comes to qualified income. Cash income is non-existent in the mortgage world. Many self-employed borrowers take advantage of taking write offs. Unreimbursed expenses can save self-employed people thousands of dollars but is bad when they are qualifying for a mortgage. Lenders use adjusted gross income which is the net income after tax deductions. Part-time jobs, other jobs, second jobs, and other sources of income cannot be used unless the borrower has a two year history of making such other income and reflects on the income tax returns. The good news is lenders allow non-occupant co-borrowers to be added to the main borrower on FHA and Conventional loans. FHA is the only government loan program that allows non-occupant co-borrowers. VA and USDA do not allow non-occupant co-borrowers on VA and USDA loans. Fannie Mae and Freddie Mac allow non-occupant co-borrowers to be added on conventional loans.
In this article, we will discuss and cover non-occupant co-borrower mortgage guidelines on FHA and Conventional loans.
Non-Occupant Co-Borrower Mortgage Guidelines On FHA Loans
In this article, we will discuss the non-occupant mortgage guidelines on FHA and Conventional loans.
In this paragraph, we will go over the non-occupant co-borrower mortgage guidelines on FHA loans. HUD, the parent of FHA, sets the HUD Agency Guidelines on FHA loans. Before we delve into the non-occupant mortgage guidelines on FHA loans, lets define what a non-occupant co-borrower is. Non-occupant co-borrowers are co-signers of a home mortgage. Non-occupant co-borrowers do not live with the main borrowers. They have their own homes and/or apartments. The purpose of non-occupant co-borrowers is in the event the main borrower default and/or forecloses on their mortgage, the lender will hold the non-occupant co-borrowers liable for the defaulted debt. HUD allows as many non-occupant co-borrowers to be added to the main borrower’s home loan. Non-occupant co-borrowers do not have to live nearby the main borrowers. There is no distance requirements of the main borrower and non-occupant co-borrowers to live nearby. Non-occupant co-borrowers can live out of state. Non-occupant co-borrowers need to meet all HUD Agency Guidelines in order to qualify. This includes meeting HUD Agency Guidelines with regards to minimum credit scores, debt to income ratio, and other credit/income requirements.
There are no limits on the number of non-occupying co-borrowers to be added. However, all non-occupant co-borrowers need to meet the minimum HUD Agency Mortgage Guidelines. This includes with regards to the minimum credit score requirements, debt to income ratio caps, waiting period after bankruptcy and/or foreclosure. The qualifying credit score used with the middle credit score of the borrower with the lowest credit scores. This is whether the main borrower and/or co-borrowers has the lowest credit scores.
Fannie Mae And Freddie Mac Non-Occupant Co-Borrower Mortgage Guidelines On Conventional Loans
Fannie Mae and Freddie Mac Non-Occupant Co-Borrower Mortgage Guidelines allow for non-occupant co-borrowers to be added on owner-occupant primary conventional loans. Unlike FHA Loans, conventional loans does not require non-occupant co-borrowers to be related to the main borrower by law, blood, and/or marriage. You can have friends, co-workers, business associates become non-occupant co-borrowers Conventional loans require a 3% down payment on a home purchase for first time homebuyers. First time homebuyers is defined as a home buyer who did not have any homeownership interest in the past three years. Otherwise, owner occupant homebuyers need a five percent down payment on a home purchase on conventional loans.