July 22, 2015
We often get reader questions about co-borrowing, FICO scores and other factors. One recent question asked of us involves a couple who have a single income, student loan debt, and some FICO score issues. The reader wanted to know if being a co-borrower with a higher FICO score could help with loan approval in spite of the co-borrower having no income and student loans.
The FHA loan rules found at the FHA official site (www.fha.gov) state the following about co-borrower income:
“The lender must analyze the income of each borrower who will be obligated for the mortgage debt to determine whether the borrowers income level can be reasonably expected to continue through at least the first three years of the mortgage loan.” That alone implies that all borrowers to be obligated on the FHA loan must have verifiable income.
The FICO score issue is another problem, as the lender will examine the scores of all applicants. A borrower who does not meet the FHA and/or financial institution’s FICO minimums is likely to either be turned down for a loan or, in certain instances, get approved for a loan with a higher down payment. Loan approval in such cases would be entirely at the lender’s discretion unless the FICO scores are below FHA minimums.
A co-borrower with no income AND student loan debt is likely to make things difficult where loan approval is concerned but if the co-borrower has certain compensating factors, and depending on state law, there may be a better chance at loan approval.
All the above should be read with the understanding that state community property laws may apply in these situations. Community property laws govern how a legally married couple enter into debts together in the marriage relationship. No two community property law states are exactly the same so you’ll need to check with a local authority to learn what may or may not be possible under the law and according to lender standards.
Do you have questions about FHA 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.
Browse by Date: