Co-Signers and Non-Occupying Co-Borrowers

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Occasionally, homebuyers find it necessary to have the further guarantee of a non-occupying co-borrower or a co-signer on a loan. Normally this occurs when the primary borrower(s) lack the financial strength to qualify for the mortgage on their own.

All non-occupying co-borrower or co-signers must be related to the borrowers either as a blood relative or by marriage. Non-occupying co-borrowers or co-signers who lack this may still be acceptable if a long-term family type relationship can be documented. In no case can the relationship be arising out of the mortgage transaction.

Also, a non-occupying co-borrower or a co-signer, just like the borrower, must exhibit an acceptable credit history. Borrowers or non-occupying co-borrowers / co-signers who do not have acceptable credit are not eligible for a mortgage loan. The non-occupying co-borrower or so-signer does not offset poor credit history on behalf of a borrower.

So, the question is what is the difference between a non-occupying co-borrower and a co-signer on a mortgage loan? It is primarily due to whether the party is taking title to the property at the time of the closing or not. All non-occupying co-borrowers must take title to the property on the subject transaction. Because the purchase contract establishes conveyance of the property from the seller to purchasers, in the case of a non-occupying coborrwer, they must appear as a purchaser on the sales contract. If they are not on the contract, then cannot take title. They must be added to the purchase contract.

If the party does not wish to take title to the property, they are a co-signer. As a co-signer they are obligated to the mortgage but they do not have title to the property. If a borrower wishes to be on the loan but not take and they appear on the contract, they must either be a non-occupying co-borrower or they must be removed from the contract.

The key to both non-occupying co-borrowers and co-signers is to review the purchase contract. The contract establishes who the property is being conveyed to and who will be taking title. In all cases, the lender will follow the contract as written.

For more information and requirements on non-occupying co-borrowers and co-signers, please contact your Googain Loan Officer.

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