When it comes to FHA co-signers for FHA loans, it is the same when talking about non-occupant co-borrowers. The term co-signers sometimes gets confusing when talking about mortgages.
When co-signing for a mortgage, that person will still be on the mortgage and it will still count towards their overall credit. The co-signer can only be taken off if the primary borrower refinances the loan, even with a FHA Streamline.
In this post, I will be talking about co-signers for FHA loans, because this is different when using a co-signer for a conventional loan. The main reason is because the primary borrower on a FHA loan does not need to qualify on their income own income when using a co-signer. On a conventional loan, the primary borrower still needs to qualify with certain income ratios.
There are two types of FHA co-signers. The FHA terminology for this is non-occupant co-borrowers.
- If the co-signer is a family member or relative, then all the normal rules apply regarding FHA loans.
- If the co-signer is not a family member or relative, then the down payment must be 25%.
Knowing the correct differences for FHA Home Loans is important. I have seen some loan officers say that you can have a co-borrower with good credit to over come the primary borrower’s bad credit. Or that one borrower can’t have two FHA mortgages.
Another way that FHA non occupant co-borrowers are used is when the parents of a college student want to buy a property for their kids. Keeping in mind that the college student doesn’t need to show any income and has to be 18 years of age. And sometimes this scenario has been mentioned as FHA Kiddie Condo Loans. (and the property doesn’t have to be an actual condo, it can be a single family dwelling)
Important Reminders : In regards to the non-occupying co-borrower, aka co-signer, the good credit of the co-signer can’t over come the bad credit of the primary borrower.
The co-signers, aka non-occupant co-borrowers, can have a primary home, even a home with a FHA mortgage on it. Meaning that the home does not have to be free and clear. But it is considered a debt and is part of the qualifying ratios. I talk about having two FHA mortgages in this post : How can I have two FHA mortgages.
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