Co-signer on an FHA loan

Nice houseYour neighbor tells you about a fantastic home that has to be sold. The home is an absolute bargain. There's just one problem: you don't make enough money to buy a home. Does this sound familiar?

One of the advantages of an FHA loan is the flexible co-signer requirements. The FHA will allow a non-occupant cosigner to be on the mortgage note if they satisfy the HUD borrower eligibility criteria.

Adding a cosigner may help a home buyer qualify for an FHA-insured loan in certain cases. If the borrower's income is too low or monthly obligations are too high, adding a cosigner or co-borrower may help get mortgage approval.

Lenders are concerned about the borrower's credit score. In the loan analysis, the lender will always utilize the credit ratings of the borrower (or cosigner) with the poorest credit. A cosigner or co-borrower will not assist you if you have a poor credit score or below-average credit.

A co-signer should have a consistent source of income and a two-year employment history. The co-signer must satisfy the same minimal requirements as anybody applying for an FHA loan.

Who Can Serve as a Cosigner or Co-Borrower?

If you apply for an FHA loan with a cosigner, HUD's borrower rules allow the family to participate as a cosigner.

Among these relatives are the following:

  • Ex-spouses and spouses
  • Parents
  • Siblings
  • Stepchildren and children
  • Uncles and aunts
  • Cousins
  • Close friends who have a long history of relationship

The cosigner must be a US citizen. Thus, even if the person is a family member, if he or she is not a citizen, they are unable to cosign for an FHA loan.


Co-signer Requirements for FHA Loans

Many of the same criteria apply to co-signers as they do to the main borrower of an FHA loan. It's as if they're applying for a mortgage on their own. Co-signers must be willing to fulfill the following requirements:

  • work experience of two years with a consistent income
  • income and assets must be documented.
  • W2s and tax returns must be provided.
  • co-signers must satisfy the FHA's minimal credit requirements.
  • a US citizen with a social security number is required.
  • and all mortgage papers must be signed.

What is the difference between a non-occupying co-borrower and a co-signer?

The distinction between a non-occupying co-borrower and a cosigner is that the non-occupying co-borrower owns the property, while the cosigner does not. In both cases, the co-signer and non-occupying co-borrower sign the mortgage and are liable for its payments.

Borrowers and co-borrowers who acquire title to the property at settlement, whether occupied or non-occupied, are obliged to pay the mortgage note and must sign any security documents.