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One of the nice features of an FHA loan is the capability of utilizing a relative to qualify. Now you may wonder, What’s so special about that? Well, what is special is that the relative DOES NOT have to live in the property. The relative then becomes a non occupying co-borrower. On a typical conventional loan, a co-borrower is allowed but it has to live in the property.

There are some factors to consider when utilizing a non occupying co-borrower:

• The credit report of all applicants is utilized. Therefore, if the borrower does not qualify because of poor credit history by itself, it will not qualify with a co-borrower either.
• The co-borrower has to have enough income to cover his/her financial responsibilities in addition to the new mortgage payment including taxes and insurance.
• The co-borrower could be a close friend as opposed to a relative but then the transaction would require a minimum of 25% down payment. If it’s a relative then the down payment would be as little as 3%.
• The co-borrower does not even have to live in the same state to qualify.
• The loan would show up as a liability on the co-borrower’s credit report. This may affect any future credit related purchases made by the co-borrower.

Though not everyone has a relative willing or able to help with a property purchase, for those that do this is a great opportunity to purchase their home without having enough income.