Does The FHA Allow Non-Occupying Co-Borrowers?
Yes, the FHA allows non-occupying co-borrowers. This means you can have a co-borrower on an FHA loan who doesn’t make the home their primary residence. However, at least one borrower must live in the house as their primary residence.
Non-occupying co-borrowers can help borrowers qualify for an FHA loan by providing additional income and improving the debt-to-income ratio (DTI). This can make the qualification process easier for those who might not meet the requirements on their loan.
It’s important to note that non-occupying co-borrowers aren’t unique to FHA loans. Other loan types, like VA loans in certain circ*mstances and some conventional loans, also allow for non-occupying co-borrowers.
How Does Co-Borrowing Work?
Co-borrowing is a relatively unique option for home buyers.
The FHA will allow another borrower, who will not live on-site, to co-sign on an FHA home loan. When applying for a mortgage loan with a non-occupying co-borrower, the lender will take all of the income, liabilities, assets and the credit score of both borrowers into account.
Since a non-occupying co-borrower can be included in the underwriting process, the occupying borrower often sees an improvement in their approval chances. Typically, non-occupying co-borrowers have a higher income that can increase the primary borrower’s chance of achieving homeownership.
Keep in mind that most loans use the lower-median FICO® Score between all the borrowers on the loan, so the non-occupying co-borrower doesn’t necessarily need to have a higher credit score than the primary borrower.
