Non occupying co borrower freddie mac
However, the co-borrower is also obligated to the mortgage repayment terms. Some lenders who allow non-occupant co-borrowers, such as Fannie Mae and Freddie Mac and some conventional home lenders, require a non-occupant borrower to be a relative of the person who will be residing in the home. The non-occupant borrower must be related to you by blood, marriage or law to qualify as a co-borrower who will not reside in the home. This additional limitation exists with many first-time homebuyer programs, and the borrower may be allowed to tender a lower down payment. For example, you may purchase a home as a non-occupant borrower and to the mortgage the name of a child who may is a full-time college student or has low income.
Should I Add a Co-Borrower to my Mortgage Application?
During the underwriting process, the loan officer will determine your ability make the monthly loan payments as required by the terms of the mortgage. Your monthly income is key to the determination of whether you qualify for the loan. Lenders use a debt-to-income ratio to determine whether you and the non-occupant co-borrower qualify for the mortgage. Your credit history and credit score will be reviewed by the loan officer to determine your creditworthiness and whether your credit presents an acceptable risk for the lender to approve a mortgage loan.
Why use a Non-Occupying Co-Borrower?
Marie Huntington has been a legal and business writer since with articles appearing on various websites. Occupancy Some mortgage loans are considered owner-occupied loans.
Family Relation Some lenders who allow non-occupant co-borrowers, such as Fannie Mae and Freddie Mac and some conventional home lenders, require a non-occupant borrower to be a relative of the person who will be residing in the home. Qualifying Income During the underwriting process, the loan officer will determine your ability make the monthly loan payments as required by the terms of the mortgage.
A non-occupant borrower is pretty much exactly what it sounds like.
This is someone who is also listed on the loan but is not living in the home. Essentially, a non-occupant can be anyone, as there are not relational requirements between the occupant and the non-occupant borrowers. For example, the non-occupant borrower does not need to be a parent or child of the main borrower; they could simply be a friend, distant relative, or theoretically, at least a complete stranger. However, the non-occupant borrower cannot have a financial interest in the sale of the property; they cannot be a real estate agent, contractor, or developer who would profit from the sale of the house.
Other than that, there are no limits to who can be a non-occupant borrower. While these two roles are similar, there are important differences. A cosigner will have no official ownership of the property, but will be listed as a responsible party on the mortgage note. While they are not liable for repaying the obligation, they will become liable if the loan goes into default. A co-borrower, on the other hand, must be listed on the title of the property, giving them ownership status in the home.
Conventional Loan With Non-Occupant Co-Borrower
While payment plans will be worked out between the occupant and the non-occupant, a non-occupant borrower is responsible as far as the lender is concerned for repayment of the loan. The biggest difference, however, is ownership. As a non-occupant borrower, you have just as many ownership rights as the other person. So how is this unique situation treated by lenders?
A lot will depend on the nature of the lender, as well as the specific loan type you are seeking FHA, jumbo, or refinancing, for example , but there are some common threads that all lenders will consider. One of the most common concerns that people have with non-occupant borrowers is that there will be a requirement for income between the occupant and the non-occupant. Borrowers are concerned that there should be a balance between the two incomes, with one earning a comparable amount to the other.
In the past, there was a requirement for non-occupant incomes, but this been phased out to allow for greater borrowing flexibility.
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Another concern that borrowers have is how much of the costs can be contributed by the non-occupant. The truth is, there is no limit to how much can be contributed by the non-occupant.
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Now that rule has been retired and there are no organizations that require a certain amount from either borrower. This gives you even more freedom and flexibility when seeking a loan with a non-occupant borrower.