Non-occupant co-borrower for conventional loan

[Anonymous]

We want to put an offer on a house using only my husband's credit and income ( I am a stay at home mom so no income and my credit score is lower than his).   He has good credit and we have no debt. We also have  20%  for the  down payment. He makes more than enough to qualify for the loan but  the problem is that he is currently freelancing on a long term contract.  This freelance job may turn permanent but we are not sure of when this will happen and so can't provide the lender with the necessary work history documentation.   My father offered to cosign so that we can qualify since this is a good time to buy and we can easily make the payments.  My father has excellent credit,  has very little debt ( no mortgages or car payments) a very high income and very solid work history.  I did some research about non occupant co borrowers and there seems to be mixed information regarding this possibility on conventional loans.  I have read that it can be done as long as the primary borrower can meet lending criteria on  his/her own. I also read that non occupant co borrowers are not allowed on conventional loans.  I am wondering what the story really is and if this is an option for us. I thank you for any info and for taking the time to answer this!

[ShanetheMortgageMan]

With conforming financing (which is the most common type of conventional financing) you are fine to bring in your own down payment, but have the non-occupant co-borrower qualify for the debt ratio portion.  All income, debts, and assets are mixed together to qualify.

There are two different set of conforming guidelines depending on the loan program guidelines the lender is underwriting under - Fannie Mae's or Freddie Mac's.  Both permit non-occupying co-borrowers, however Fannie Mae still requires the occupant borrowers debt ratios to qualify whereas Freddie Mac guidelines do not require the occupant borrower's ratios to qualify at all.  Majority of lenders use Fannie Mae guidelines, which is why finding lenders who allow a non-occupant co-borrower to quailfy for the loan entirely on their income alone with conforming fiancing can be tougher to find.

[Anonymous]

Thank you. I had a feeling it wouldn't be that easy..

[ShanetheMortgageMan]

Well having 3 people on a loan, with 3 sets of documentation isn't ever "easy" per se due to the amount of total paperwork, but there are plenty of lenders out there who permit it.

[Anonymous]

Thank you for all your help! I did find a lender that is willing to do this, but at a slightly higher interest rate.   Is that pretty much what I can expect or are there lenders willing to do this without increasing the interest rate? Also, would using a broker be a good idea in this case? Thanks in advance for answering.

[ShanetheMortgageMan]

You are welcome.

Interest rates should be the same for a non-occupant co-borrower transaction as long as the non-occupant co-borrower doesn't have a lower score, because then that would result in a lower credit score being used/higher interest rates with conformign financing.

Either a flexible lender or a mortgage broker (who typically has access to multiple lenders) would be a good place to seek out this type of loan.