12-28-2008 08:14 PM
No they just need to qualify
Here is what the guidelines say
100.02 − Co-Borrower/Co-Signer
Co-borrowers take title to the property and obligate themselves on the mortgage and note. A co-signer has no
ownership interest in the property (does not take title) but must execute the loan application and sign the
mortgage note and will be liable for the repayment of the loan. The co-borrower or co-signer’s income, assets,
liabilities, and credit history are included in the determination of creditworthiness. The co-signer must have a
principal residence in the United States and cannot be a party to the transaction such as seller, builder, real
estate agent, etc.
FHA will permit co-borrowers, who take title to the property and obligate themselves on the mortgage note. FHA
will also permit a co-signer with no ownership interest in the property to execute the loan application and
mortgage note and, thus become liable for repayment of the obligation. The co-signer’s income, assets, liabilities,
and credit history are included in the determination of creditworthiness.• Neither a co-borrower nor a co-signer may be a party that has an interest in the transaction, such as the
seller, builder, real estate agent, etc.;
Note: Exceptions may be granted if the seller and the co-borrower/co-signer is a family member of the
occupant owner.• An individual signing the loan application must not be otherwise ineligible for participation in the FHA loan
program;• Unless otherwise exempted, any non-occupying co-borrower or co-signer must have a principle residence in
the United States;• Except for any distinction listed here, all references to co-borrowers, including loan-to-value limitations, will
apply equally to co-signers.
12-30-2008 09:55 AM - edited 12-30-2008 12:12 PM
If the co-signer (non-occupant co-borrower) is not related by blood, marriage or law... then you are limited to 75% LTV though.
Full guidelines for co-signers who aren't occupying the property (aka non-occupying borrowers) read:
B. Non-Occupying Borrowers. When there are two or more borrowers, but one or more will not occupy the property as a principal residence, the maximum mortgage is limited to a 75 percent LTV. However, maximum financing, as described in paragraph 1-7, is available for borrowers related by blood, marriage or law (spouses, parent-child, siblings, stepchildren, aunts-uncles/nieces-nephews, etc.), or for unrelated individuals that can document evidence of a family-type, longstanding, and substantial relationship not arising out of the loan transaction. All borrowers, regardless of occupancy status, must sign the security instrument and mortgage note. If a parent is selling to a child, the parent cannot be the co-borrower with the child on the new mortgage unless the loan-to-value is 75 percent or less. To reduce risk exposure, mortgages with non-occupying co-borrowers are limited to one-unit properties if the LTV will exceed 75 percent. While we do not object to legitimate transactions in which non-occupant borrowers assist in the financing of the property–such as when parents help their children buy a first home–this arrangement may not be used by non-occupant borrowers to develop a portfolio of rental properties. The degree of financial contribution by the non-occupant borrower, and the number of properties similarly owned, may indicate that an investor loan has become the practical reality and that, in effect, family members are acting as "strawbuyers." FHA does not impose additional underwriting criteria on such transactions, such as specific qualifying ratios the occupying-borrower must meet individually. Lenders must judge each transaction on its merits.
12-30-2008 12:53 PM
Does the co-signer need to be a relative for a FHA loan?
Doesn't have to be relative.
Examples of eligible persons other than blood relatives:
* Future in-laws
* basically, someone with a vested interest in the borrower.
this is open to underwriter interpretation.
12-30-2008 01:50 PM
I am trying to clean up my credit to purchase the farm I am living on.
I checked with FHA and they said I was approved. When they asked my income I said is that net or gross and he said gross...I am self employed and I do write off everything that I can. Well its not gross is what I am told now. So the person I am buying from and is financing for the first 3 years...which will be up in Oct 2009 said he would co sign except they said he can't because he is not related to me.
12-30-2008 02:40 PM
he is also an 'interested party' in the transaction