NJ First-Time Home Buyers


Non-Occupant Co-Borrowers....How Knowing the Rules Can Help You Obtain a Home Now!!!


Steve KappreVia my buddy Larry Bettag - some info regarding CO-SIGNING FOR A HOME. 


Co-Borrowers are borrowers that sign in order to help the main or primary borrower qualify for a loan.  The big hub bub in mortgage banking recently has been Non - Occupant Co-Borrowers.  Non-Occupant Co-Borrowers are borrowers who will help the borrower guarantee the loan, but the Non - Occupant won't live in the property.  There are things that you need to know about them.


 Down Payments Vary Between FHA and Conventional

First with Fannie and Freddie lenders require 10 percent down payment with at least 5% being the borrowers own money.  FHA doesn't really care about how much money comes from gift, borrower, co-borrower or non-occupant co-borrower so long as the minimum down payment is met.  For a single family residence, 3.5% is the  rule for FHA.    HOWEVER, on a two unit purchase, the FHA borrower needs 25% if they're using a non-occupant co-borrower...DON'T GET FOOLED.  The rules are so specific and they morph and change all the time!!!!  http://www.househomeinfo.com/images/j0409141.jpg

2)  Ratios - Fannie and Freddie are different than FHA in a very strict fashion.  Here's the gig:

    Fannie/Freddie - generally the borrower still needs to earn enough income that his ratios dKnow Your Ratioson't exceed 38 for the housing ratio and 43 for the total debt ratio.  This isn't hard and fast because ultimately AUS or automated underwriting systems will determine this....but as a general rule you need to be aware that the borrower needs to have some real capacity to pay back the loan with minimum reliance on the non-occupant co-borrower;

     FHA - The borrower can have ratios of 1,000,000 over 1,000,000 so long as between borrower and non-occupant co-borrower you get fairly close to the 29 and 41 ratios that FHA requires.  This is AWESOME for dad's who want to co-sign for their kids while they're making no money going to college.  I do that all the time for parents and kids out a Northern Illinois University.  The kid makes squat-ola as a college student, but the parents have sufficient income to qualify. 



Non-Occupant Co-Borrowers can still apply for a mortgage on their own in order to buy a home.  A fear exists that if I co-sign, I won't be able to buy a home later because I have a mortgage reporting on a credit report.  NOT TRUE!  So long as the occupant can demonstrate that they've been paying the mortgage on time, most lenders will take the last 6-12 month's cancelled checks to show that the borrower has been making those payments.  If so, and the payments have been made on time, the non-occupant co-borrower is still able to buy another property without having that loan count against him or her in their quest for a new purchase!



Now's the time to consider buying a home, but just because you may not qualify on your own, wellllllllllll, let's just say that there are still viable alternatives out there. 

Comment balloon 2 commentsStephen Kappre • February 28 2009 11:36AM


This is good to know, Steve.  I have a client with NO credit history who can't get a loan.  This may be the way he has to go.

Posted by Heather Goodwin, Coldwell Banker Gosslee (Licensed by the Louisiana Real Estate Commission) over 11 years ago

Heather - Maybe. Just run the whole scenario by your lender, because although a non-occupying co-borrower may help the debt-ratio, regarding more recent FHA changes, including rules that lenders themselves put in place "on-top" of FHA's rules, the lender may approve (or not approve) the loan off of the borrower with no credit score. FHA might so "ok" but from lender to lender sometimes guidelines have to be checked. I lend for a handful of big name banks and more than ever I have to price loans to one specific investor because of quirks from one investor to the next.

Posted by Stephen Kappre, Helping You Home (KW Hometown) over 11 years ago

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