January 9, 2013
A reader asks, “Can my mother co-sign an FHA mortgage for me even if she has a veteran’s loan for her home? Will they use my credit, or just hers, or both? I am confused. My credit is not so good but she is willing to help so I don’t know…”
FHA loans require credit, income and employment data on all parties financially obligated on the mortgage. What specifically does the FHA require from co-signers or co-borrowers? Here’s some information from the FHA official site, which states:
“Co- borrowers take title to the property and are obligated on the mortgage note and must also sign the security instrument. The co-borrower’s income, assets, liabilities, and credit history are considered in determining creditworthiness.”
Additionally, “Co-signers do not hold ownership interest in a property, but are liable for repaying the obligation and must sign all documents with the exception of the security instruments. The co-signers income, assets, liabilities, and credit history are considered in determining creditworthiness for the mortgage and the co-signer must complete and sign the loan application.”
There are some additional rules that govern co-signers and co-borrowers. According to FHA.gov, “A co-borrower or a co-signer may not be a party that has a financial interest in the transaction, such as the seller, builder, real estate agent, etc. Exceptions may be granted if the seller and co-borrower/co-signer is related to the owner by blood, marriage or law.”
Such exceptions may be required to be documented in writing, so be prepared to submit copies of paperwork needed to establish the relationship where required. Additionally, FHA loan rules say all co-signers must not be deemed “otherwise ineligible for participation.” If a co-signer is delinquent on federal debt, for example, that could be a serious issue where applicable.
Additionally, FHA.gov states, “Unless otherwise exempted (e.g., military service with overseas assignments, U.S. citizens living abroad), any non-occupying co-borrowers or co-signers must have a principal residence in the United States. All references to co-borrowers – including the 75 percent LTV limits etc. – apply equally to co-signers (except co-signers do not take title to the property or sign the security instruments).”
For more information on these rules, contact the FHA directly at 1-800 CALL FHA.
Do you have questions about FHA home loans? Ask us in the comments section.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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