Non-occupant co-borrower

With very strict and tough guidelines, one option for home buyers is the non-occupant co-borrowers. This is a great program for parents who are trying to help their kids purchase their first home. It is also great for older children who are helping their older and possibly retired parents qualify for a mortgage. The latter usually applies because the parents do not qualify anymore because their income has been reduced from their salary to their retirement income. On the first example, a lot of time when kids come out of college, they either don’t have the establish credit or the income to qualify for their purchase. In some cases they do not have either. This is where the non-occupant co-borrower can be very helpful. This is an FHA program and that brings some great benefits; 3.5% down payment, up to 6% in seller concessions, and in some cases manual underwriting. The program puts both the parent and child on the loan, and this mostly helps the child establish credit. The loan can be re-financed later to remove the parents. This program also lets you do an FHA streamline to take advantage of lower rates. A quick recap, on streamlines; there is no appraisal needed, and no income and asset verification. Banks will require a minimum score, and currently that score is 620.

What a lot of parents have been doing, is they are helping their child purchase a home while in college. The reason is, so they can rent the other rooms in the house out to friends and/or other students to help offset the mortgage payment. When the child finishes school, he can keep living there, rent it out, or possibly sell it. This happens a lot in college towns, because some of the homes can sometimes be very affordable.

The underwriting guidelines are the same as for any regular FHA loan. Income and assets will need to be verified, and the ratios are 31/43, but most banks will take an automated approval.

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