In general, lenders treat co-borrowers that live in a property the same way they do co-borrowers who do not live in a property. In both cases lenders consider the co-borrower's gross income, monthly debt expense, credit score, employment history and other factors, along with the same information for the other applicant, to evaluate the borrowers' mortgage applications. We provide a comprehensive overview of mortgage qualification guidelines for you to review.
If a co-borrower does not intend to live in the property then she or he is usually required to submit a separate loan application while if co-borrowers intend to both live in a property they are typically only required to submit one joint loan application. Either way, the personal, financial and credit information provided by both applicants is the same. Additionally, in both scenarios, both co-borrowers are legally responsible for the mortgage even if one does not intend to live in the property.
The main difference for a co-borrower that does not plan to live in the property being financed is that the housing expense for the property that individual lives in is considered monthly debt. This increases the combined monthly debt for the borrowers which impacts what size loan you can afford. In short, the higher the combined monthly debt expense, the lower the mortgage amount you qualify for.
For example, if a mother wants to be a co-borrower for her son but not live in the property being financed then the monthly mortgage or rent payment the mother makes on the home she lives in is counted as a debt expense when you apply for the loan. If the mother is responsible for a $2,000 mortgage payment on her home, then $2,000 is included in the debt payments she lists on her loan application along with other monthly debt payments including for credit card, auto and student loans. In this scenario, the co-borrowers need to earn enough combined gross income to afford the monthly payments on two homes -- the property the mother lives in and the property the son is buying -- plus any other debt expenses the borrowers have.
If a co-borrower who does not plan to live in the property being mortgaged has high monthly debt expenses, including her or his housing payments, and relatively low income, then the co-borrower may be detrimental to the loan application. The primary borrower who wants to buy they home may qualify for a smaller loan amount or may not be approved for the mortgage.
Use our Two Person Mortgage Qualification Calculator to determine what size mortgage co-borrowers can afford based on their monthly gross income and debt payments
Please note that if a co-borrower intends to live in the property being financed then only the new mortgage payment is counted as debt when you apply for the loan. For example, if spouses that plan to live in a home together apply for a mortgage as co-borrowers then only the total monthly housing expense -- mortgage payment, property tax and homeowners insurance -- for the home they want to buy is counted as debt (along with their combined credit card, auto and student loan payments).
Regardless of if you plan to live in the property being financed, if you are not a co-borrower on the loan then your income and debt does not factor into the borrower’s loan application. The one exception to this guidelines is the HomeReady Program which allows the income from a non-borrower household member, such as a relative, to be used as a supporting factor on a loan application.
In this scenario, the individual lives in the property being financed but is not listed on the mortgage. The individual's income is not added to the applicant's income but it can provide a helpful nudge if the applicant is on the border in terms of being approved. Additionally, only the applicant is listed on the mortgage note so she or he are solely responsible for the loan. We provide a comprehensive overview of the HomeReady Mortgage Program for your to review.
We always recommend that you contact multiple lenders to understand how they would handle your unique situation. You can review lenders in your area on the table below. We advise you to contact at least five lenders as as qualification guidelines vary.
You can also use the FREEandCLEAR Lender Directory to find lenders that offer the HomeReady Mortgage Program.