What is an Arizona home-buyer to do when they cannot quite qualify for a home loan on their own? If they are using FHA financing they have the advantage of adding a cosigner to their loan application in order to help them qualify! FHA financing is very unique in this regard. They allow a buyer to benefit from the added income and assets of a qualified cosigner.
FHA calls a cosigner a “non-occupying co-borrower.” Basically, FHA allows someone who does not occupy the home to be added as a co-borrower in order to help the main occupying borrower qualify. What is most unique about this is that FHA still considers the transaction with a non-occupying co-borrower a primary residence transaction. Without this being the case, the transaction would be classified as an investment purchase. This would dramatically change the minimum down payment your Arizona FHA Lender would require and the interest rate that would be charged due to the fact that someone who is not going to occupy the home is going to be on the loan.
Who Can Co-Sign On an FHA loan?
A non-occupying co-borrower (someone co-signing that does not live in the home) on an Arizona FHA mortgage must be related to the occupying/main borrower.
What Does an FHA Co-Signor Have to do?
The cosigner will have to follow every step the main borrower themselves has to take. The cosigner will need to work with an Arizona FHA Mortgage Lender to:
1. fill out a complete loan application
2. have a tri-merge credit report pulled
3. provide documentation to verify income, assets and identity
4. sign loan paperwork prior to approval and then again at closing
5. provide a letter that defines their relationship to the borrower
It’s that simple! Once your lender has full file has been created for both the borrower that will occupy the house and the non-occupying co-borrower the overall file will be underwritten by an FHA approved underwriter at PrimeLending. Check out FHA’s Official Site for more info.
By Jeremy House