Can my sister be a non-occupent cosigner on my FHA loan if she has no FICO score?

Asked by adamk135, Chicago, IL Mon Nov 26, 2012

She has no credit history. She works full time and has been at her job for over 2 years. My FICO is well within FHA guidelines so i only need her to meet Debt-to-Income ratio requirements. My husband got laid off before we were set to close. He does get Unemployment benefits and mortgage would be cheaper than rent. Will refi eventually to get my sis off of mortgage but need her now to get house. Is this possible?

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Mon Nov 26, 2012
...a borrower with no credit can go through FHA with a coborrower. However, it will require what we call a manual underwrtie. The file will need to be reviewed start to finish by an underwriter.
The ratio guidelines for this type of underwriting is (with no exceptions) 31/43.
Your total housing ratio may not exceed 31% of your combined income. Your total debts (housing plus nonoccupant coborrower rent and debts) cannot exceed 43%.
Husband's unemployment will not be counted as income.
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Sue Archer R…, Agent, Palm Harbor, FL
Mon Nov 26, 2012
I answered this question for you yesterday. I might suggest, if you plan on her co-signing for a specified period of time, rather than the life of the loan, that you speak with an attorney to draw up an agreement. It's better to protect that relationship than let it sour later over something like this, believe me.

The specific answer to your question will be from your lender. They should be able to explain whether they can use her income without her having a credit score or whether they need to have her establish a credit score. They ought to be able to do that.

But one other idea that might be worth considering. if your husband is unemployed they might be able to use his unemployment income for part of the qualification? We use it in calculations for loan modifications, i would think that maybe they'd use it for loan origination.

I'd love it if you contacted me back as to how it all turns out. We always learn from the experiences of others and that will be helpful to many other people here.

Thanks AdamK135 and good luck!
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Cindy Davis, Agent, San Diego, CA
Mon Nov 26, 2012
I agree that asking this question on a website is not going to get you a definitive answer. It's best to meet with a reputable lender in your community.
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Bob Willett, , Sacramento, CA
Mon Nov 26, 2012
There is no way of knowing for sure if your sister will help without a full application, however there is nothing that says it won’t work. In fact this appears based on the information you have provided to be the perfect scenario for a non-owner occupied co-signed. You will be buying a home with a payment less then you current rent, and if I’m not mistaken the problem is the lender can’t use the unemployment income or you would be able to buy. This is when I like to use co-signers – when there is income that would qualify you except that it can’t be used.

However, just because it may be able to work does not mean that you should do it. You do need to carefully consider what will happen if you husband does not go back to work, and refinancing to remove your sister may not be as easy as it sounds. Best of luck.
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