FHA Loan Articles
News, updates, and explanations to keep you informed.
The Difference Between a Co-borrower and a Co-signer
If you're applying for an FHA home loan, you aren't forced to apply and be responsible for the debt all by yourself--FHA rules allow a co-borrower or co-signer to apply alongside the borrower.
Having a co-borrower or co-signer may improve the FHA loan applicant's chances of getting approved for the mortgage. Using a co-borrower or co-signer is also a way for a borrower with established credit to help a less established co-borrower become a home owner under the proper circumstances.
But what's the difference between a co-signer and a co-borrower? Do they have the same rights and responsibilities?
In the eyes of the FHA and your lender, these are two separate things. Co-signers don't have the same benefits as co-borrowers, though they may share the same responsibilities in many cases.
The FHA official site says, "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."
That isn't the same as the FHA requirements for a co-signer, who does not have interest in the property purchased with an FHA insured mortgage. Even so, the co-signer does have responsibility on the loan.
The FHA states, "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."
Co-borrowers or co-signers cannot have financial interest in the property--meaning they can't own the property or borrow with the owner. The same rule applies to the builder, real estate agent, any "interested parties" that could profit from the sale of the home.
That said, the FHA does provide an exception to this rule, which states;
"Exceptions may be granted if the seller and co-borrower/co-signer is related to the owner by blood, marriage or law."
FHA NEWS and RELATED ARTICLES
One type of question that sometimes arises about FHA loans-- Is there a no-credit-check version of an FHA mortgage loan? What is the criteria required for FHA loans that do not require a credit check and/or appraisal?
One not-so-common question about FHA loans still comes up often enough to discuss in detail. Some FHA loan applicants want to know if they can purchase a residence from another family member using an FHA insured mortgage.
Except for obligations specifically excluded by state law, the debts of the non-purchasing spouse must be included in the borrower’s qualifying ratios if certain conditions are met.
Some FHA borrowers have questions about applying for an FHA loan after experiencing a short sale on a previous home. The FHA loan rules found in HUD 4155.1 have the answers for borrowers applying for an FHA mortgage after a short sale.
The FHA and HUD issued new rules for mortgage insurance designed to add fiscal security to the loan program, and when those rule changed the new guidelines were published in Mortgagee Letter 2013-04.