Articles Tagged With: Cosigner

July 31, 2014

FHA Loan Rules For Cosigners: A Reader Question

A reader asks, “How can a person sign a mortgage note but not have liability to repay the obligation?” FHA loan rules mention cosigners as a non-occupying parties who must sign the mortgage note but are not obligated when it comes to financial liability. According to HUD 4155.1, the lender must perform due diligence with the cosigner the same as with the borrower: “When determining the creditworthiness of borrowers, coborrowers, or cosigners, the underwriter considers their • income • assets • liabilities, and • credit histories.” How does the FHA define the cosigner? Let’s start by looking at the FHA definition of the borrower and co-borrower: “Both occupying and non-occupying borrowers and coborrowers • take title to the property at settlement • are obligated on the mortgage note, and • | more...

June 27, 2014

FHA Loans For Schoolteachers: A Reader Question

By Joe Wallace

A reader asks, “My daughter is a schoolteacher. Where she lives, they do not give new hires full time jobs, but hire the teacher part time all the time so they do not have to give benefits. Can she get an FHA loan? Her total need would be $400,000 for the house less a 20% down payment, which she has. She has been working for a long time under this arrangement, but is not classified a a full time teacher. Her mother or I could co-sign for her if necessary. We are both retired but have verifiable incomes and property well in excess of the total loan amount.” FHA loan rules permit co-signers, non-occupying co-borrowers and other arrangements, so the answer to this question where that is concerned is that | more...

June 19, 2014

FHA Loan Credit Requirements For Co-Borrowers: A Reader Question

By Joe Wallace

A reader asks, “I have awesome income and FAIR Credit. My wife has Excellent Credit and low income. Can we qualify for a FHA mortgage with my income and her credit if we both apply? I live in Texas a community property state.” FHA loan rules governing creditworthiness and FHA loan approval are found in HUD 4155.1 Chapter Four Section A. It states, “When determining the creditworthiness of borrowers, coborrowers, or cosigners, the underwriter considers their • income • assets • liabilities, and • credit histories.” This may prove a problem for borrowers who have insufficient credit scores according to FHA or lender standards. The above quote from the FHA loan rulebook implies that the lender must consider credit and income from both parties. In the case of a community | more...

December 9, 2013

FHA Loan Credit Score Requirents And Co-Signers: A Reader Question

By Joe Wallace

A reader asks, “My son and his wife are looking to buy their first home but both have credit scores in the 570-580 range. My parents will gladly act as co-signer or co-borrower with them and their credit history is excellent. Would that help them get a loan?” FHA loan FICO score requirements state that borrowers with credit scores at or above 580 are “eligible for maximum financing”. However, lenders are free to require higher FICO scores than the FHA minimums and often do. Borrowers with FICO scores below 620 (and in many cases, 640) may have difficulty finding a lender willing to work with them on an FHA mortgage loan. This may or may not be true when a co-signer or co-borrower is present. In such cases the lender’s | more...

November 25, 2013

Are Tax Documents Required For An FHA Loan Application? A Reader Question

By Joe Wallace

A reader asks, “Does FHA use your tax returns in determining your eligibility for qualifying for a loan?” There are many reasons why a participating FHA lender may request your income tax returns as part of the FHA loan application process. FHA loan rules in HUD 4155.1 start, “All borrowers, including United States (U.S.) citizens, must have a valid Social Security Number (SSN) and must provide evidence of that SSN to the lender.” The rules say the lender is responsible for documenting and validating the Social Security Number for each applicant and may do so through a variety of means including income tax paperwork. Specifically, HUD 4155.1 Chapter One Section B states, “The lender is responsible for documenting an SSN for each borrower, coborrower, or cosigner on the mortgage | more...

May 16, 2013

FHA Loan Questions: Identity Of Interest Transactions

By Joe Wallace

One common question about FHA home loans involves the FHA rules about who can sell to whom. When it comes to a home owner selling property to someone they do not know, the rules are simple. FHA guidelines don’t allow a home owner with an “identity of interest” in the outcome of the sale to sell to an FHA borrower AND be a co-signer or co-borrower on the mortgage. What does that mean? According to HUD 4155.1 Chapter Four Section A, “A party who has a financial interest in the mortgage loan transaction, such as the seller, builder, or real estate agent, may not be a coborrower or a cosigner.” You can’t be both the buyer AND the seller. But what about in cases where the seller is a relative? | more...

October 26, 2012

Are You Eligible For an FHA Mortgage?

By Joe Wallace

FHA loans are sometimes misunderstood–some people think FHA mortgages are only for low-income families, others wrongly assume only first-time home buyers can qualify for an FHA loan. The FHA does provide a list of guidelines that list who is eligible–and who is not–to apply for an FHA mortgage or refinance. The FHA loan rules include guidelines on credit scores and minimum age–which we discuss below. The rulebook that describes these things is called HUD 4155.1. In this guideline you’ll find the following: “FHA insures mortgages made to individuals with valid Social Security numbers (SSN), and under the conditions described in this section, to state and local government agencies, and approved nonprofit organizations. Note: Employees of the World Bank, foreign embassies, etc., may not be required to have an SSN. Conclusive | more...

August 13, 2012

FHA Loan Rules: Co-Borrowers

By Joe Wallace

Some first-time home buyers looking for a home to buy with an FHA mortgage don’t come to the bargaining table alone. The choice to include a co-borrower or co-signer is an important one, and FHA loan rules have guidelines when a co-borrower or co-signer is present. FHA loan rules make a distinction between a co-borrower and a co-signer. What’s the difference? According to FHA loan rules in HUD 4155.1, Chapter Four: “Both occupying and non-occupying borrowers and coborrowers take title to the property at settlement, are obligated on the mortgage note, and must sign all security instruments.” But the rules also say cosigners “do not hold ownership interest in a property”, and while they are obligated on the mortgage note, “have no liability for repaying the obligation, and must complete | more...

October 20, 2011

Can I Add A Borrower To My FHA Home Loan?

By Joe Wallace

One common question about FHA home loans involves adding borrowers to the loan. Some house hunters begin their search for a home by themselves, but along the way decide they wish to co-borrow with someone else. The reasons vary–some borrowers get engaged to be married, others decide they’d rather share the expense of buying and owning a home with someone else, others want to purchase property with a family member. Whatever the reasons, adding someone to an FHA loan depends greatly on where a borrower is in the application process. FHA loan rules state that all borrowers must submit loan application data. No one can be added to an FHA loan without submitting their credit and employment details and other required information the same as the primary borrower. Lenders must | more...

July 12, 2011

FHA Loan Rules For Co-Signers, Co-Borrowers

By Joe Wallace

When a borrower applies for an FHA insured mortgage, he or she has the option of bringing a co-signer or co-borrower to the deal. It may be easy to assume the two terms are interchangeable, but they aren’t. Co-signers and co-borrowers have different rights and responsibilities under FHA regulations and it’s important to know which is which–especially if you’re the co-signer or co-borrower. The major difference between the two is that a co-borrower “takes title to the property”, meaning that there is shared ownership between co-borrowers. Co-signers sign the legal paperwork and are obligated to pay on the mortgage. Regardless of what financial arrangements have been made privately between the co-borrowers, on paper co-borrowers share responsibility for the mortgage payment. Co-borrowers must qualify for the VA loan together. Compare those | more...