What is a coborrower on an FHA loan?
A co-borrower is anyone, whose income, assets, debts, and credit history is being used in the qualifications for loan approval and is taking title to the property, and is obligated on the Mortgage Deed and Note.
- Maximum financing is permitted to 1-unit properties when there is a familial relationship between borrowers.
- Multi-unit properties are limited to 75% CLTV regardless of the relationship if using a non-occupant co-borrower.
- If the co-borrower is unrelated and not all will occupy the property, the mortgage is limited to 75% CLTV.
FHA does not allow persons to take title to a property without being obligated on the Note.
If you are a non-married co-borrower, there are certain rules regardless if you are a girlfriend, boyfriend parent or other relative. Non-married co-borrowers must have completed separate loan applications and separate credit reports.
A non-occupying borrower transaction involves two or more borrowers where one or more borrower(s) will not occupy the property as a principal residence.
The maximum mortgage is limited to 75% LTV. However, maximum financing is available for borrowers related by blood, marriage, or law, such as:
- Fiancé / Fiancée
- Domestic Partners
- Aunts-uncles, and
- Nieces-nephews, or
- Unrelated individuals that can document evidence of a family-type, longstanding, and substantial relationship-not arising out of the loan transaction.
Parents of a fiancé, where the fiancé will not be on the loan, will not be eligible for maximum financing for non-occupant co-borrowers.
If a parent is selling to child, the parent cannot be the co borrower with the child, unless the LTV is 75% or less.
Signature Requirements: All borrowers, regardless of occupancy status, must sign the security instrument and the mortgage note.