Mortgage Tip #26 (Counting down to #1)

It happens. Neither the borrower nor their spouse nor both combined earn enough income to qualify for the loan they need to purchase their first, or next, home. We see this most often on first time home-buyers where one or both of the spouses do not qualify for any of a handful of reasons.

Since there are different rules for different situations and since lenders augment or modify the guidelines from Fannie or Freddie and often go over-kill on FHA I will not publish a list but rather ask you to develop a relationship with a mortgage broker or loan officer who has experience doing NO/CB loans. This is one that is easy for a novice or inexperienced agent to blow.

Here are some reasons to ask a mortgage professional about an NO/CB loan:

Occupant borrower (OB) is new in a commissioned job and only shows salary, not commission, on previous tax returnes.

OB is a first time home-buyer with limited credit (not bad credit - that still ends in a denial).

OB simply doesn't have enough income on their own to qualify for the loan amount.

Remember this: if the OB has bad credit the NO/CB will not be enough to get an approval. The NO/CB must be a relative of the OB. The NO/CB is more than just a co-signer, they are a co-BORROWER with equal liability in repayment of the loan. A late payment or missed payment or foreclosure goes on the credit of the NO/CB. If the NO/CB has assets and there is a foreclosure the mortgagee (lender) may be able to get a judgment against the NO/CB and take their assets.

Fannie Mae and Freddi Mac both allow NO/CB but make sure the program counts the income of the CB for the purpose of qualifying. With Fannie the OB must qualify on DTI on their own. Again, you need the mortgage professional, one with experience in these more difficult loans, to advise and councel.

Loans requiring NO/CBs are not for the green or low volume mortgage person. You really need to have someone who know what they are talking about. Even most lender Account Executives do not know all of the requirements and caveats of every loan program where an NO/CB is used.

There are also caveats when community assistance is being used on the mortgage.

So why did I bring up the subject if I'm not going to give answers? Actually, if I'm doing the loan, I will give answers -very specific and very correct ones. FHA, Fannie and Freddie are all different and within Fannie and Freddie the different loan programs have different parameters. Who you gonna call?

Ken Cook 866-946-0120 extension 101

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