HomePath and HomePath Renovation Loan - Non-Occupant Co-Signers
The HomePath and HomePath Renovation Loan programs are a great source of financing on Fannie Mae owned homes. Both loan programs offer flexible financing alternatives for borrowers purchasing a Fannie Mae owned home. However, there is no flexibility in the guidelines when dealing with the topic of non-occupant co-signers or co-borrowers.
A non-occupant co-signer is usually a family member who doesn't occupy the house but agrees to be on the loan in order to ensure the lender that if the principal occupant of the property doesn't make the mortgage payment then as the co-signer they will. This is a very popular tool used on FHA loans when the occupying buyer lacks the income or has challenges in documenting their income necessary to qualify for a mortgage loan.
On a HomePath or HomePath Renovation Loan, while a non-occupant co-signer is permitted, Fannies Mae's automated underwriting engine, Desktop Underwriting or DU, will require that the occupant borrower qualify for the mortgage based on their own financial capacity. This means that the borrower actually occupying the property must have the necessary documented income to support the loan request without consideration given to the financial strength of the non-occupant co-signer.
There are several solutions to this challenge which are as follows:
- If using HomePath financing, the property purchase can be treated as an investment property purchase which will require a down payment of 15% of the purchase price for HomePath financing and 25% of the combined purchase price and renovation budget for the HomePath Renovation loan. Keep in mind if going this route, Fannie Mae will not accept offers from investors on the property for 15 days under the First Look Program guidelines.
- The other option is to take the loan outside of Fannie Mae and use FHA financing instead, which has only a 3.5% down payment requirement for both the standard FHA loan and the FHA 203k renovation loan. In addition, FHA has much less stringent guidelines when placing non-occupant co-signers on the loan. However, look for a wide degree of variance regarding additional "Lender Overlays" or restrictions from one investor to the next regarding this topic.
To learn more about your financing options through the HomePath and HomePath Renovation Loan Programs or if you want to qualify for a HomePath Renovation Loan you can contact HomePath-Renovation.com at (866) 351-3229. To get started on your loan application right now complete a secure encrypted online application in order to receive your loan pre-qualification within the next four business hours.