Can You Get an FHA Loan With a Cosigner?

Getting an FHA loan with a cosigner is possible but there are specific requirements the cosigner must meet. An FHA loan is a government-backed mortgage insured by the Federal Housing Administration (FHA). FHA loans require a low down payment and have more flexible credit requirements than conventional loans. Adding a cosigner can help borrowers who don’t meet the FHA credit score or debt-to-income requirements on their own.

FHA Loan Cosigner Requirements

To be eligible as a cosigner on an FHA loan the cosigner must

• Have a valid Social Security number
• Be a U.S. citizen or lawful permanent resident
• Have a credit score of at least 580
• Not be suspended, debarred, or otherwise excluded from participating in HUD programs
• Not be delinquent on any federal debt
• Intend to use the property as their primary residence

The cosigner’s income, assets, liabilities and credit history will be taken into consideration along with the primary borrower’s when determining eligibility.

The cosigner must sign the mortgage note and loan application, but does not need to be on the property title. They have liability for repaying the mortgage debt, but no ownership interest in the property.

Related Occupants as Cosigners

Borrowers can choose a relative, spouse or significant other as their FHA loan cosigner.

• Relatives eligible to cosign include siblings, parents, children, grandparents, or grandchildren. The cosigner must be related to the borrower by blood, law or marriage.

• Unmarried partners can cosign if you can document your relationship with evidence like joint bank accounts or shared living expenses

The property must be the primary residence for both borrower and cosigner.

Non-Occupant Cosigner Requirements

It is possible to have a non-occupant cosigner on an FHA loan, with some additional requirements.

The non-occupant cosigner must have their primary residence in the U.S. The only exceptions are for military personnel with overseas assignments or U.S. citizens living abroad.

A family member or spouse can still cosign even if they won’t live in the home. But unrelated non-occupant cosigners are not allowed by FHA guidelines.

Pros and Cons of an FHA Cosigned Loan

Adding a cosigner to your FHA loan application has advantages and disadvantages to consider.

Pros:

• Improves debt-to-income ratio
• Offsets poor credit history
• Allows higher loan amount
• Lower interest rate
• Lower mortgage insurance premiums

Cons:

• Cosigner is equally responsible for repayment
• Both cosigner and borrower credit affected if payments missed
• May need to refinance to remove cosigner
• Relationship conflicts if unable to refinance

Evaluate both the benefits and risks before deciding if an FHA cosigned loan is the right choice.

Alternatives to a Cosigner

If you don’t have a cosigner available, there may be other options to improve your chances of FHA loan approval:

• Improve your credit score – Pay down balances, resolve errors, and limit hard inquiries to boost your score over time.

• Use non-traditional credit – FHA allows non-traditional credit like rent payments for thin or no credit files.

• Increase your down payment – A larger down payment lowers the loan-to-value ratio and may offset credit weaknesses.

• Select FHA streamline refinance – Avoid credit approval for an FHA Streamline by refinancing your existing FHA loan.

• Apply with a co-borrower – Add a co-borrower who will be on title and the mortgage to combine income/assets.

Consult a mortgage professional to discuss all possible solutions if you don’t qualify for an FHA loan on your own. In many cases, cosigning can be avoided through credit improvement, down payment adjustments, or alternative programs.

Working With Lenders

When you apply for an FHA mortgage, the lender will verify if a cosigner is needed and if your chosen cosigner meets the requirements.

Provide complete information up front on your loan application about any planned cosigner. Fully disclose your relationship and their intent to occupy the property or not.

Confirm that your lender approves FHA loans with cosigners. Some lenders have overlays that are more restrictive than FHA’s policies.

Shopping with multiple lenders can help you find the best fit if you need a cosigned FHA mortgage. Compare interest rates, fees and cosigner policies before choosing your lender.

The Bottom Line

Cosigning allows more potential FHA borrowers to qualify for a low down payment mortgage. But cosigners take on serious legal liability for mortgage debt repayment. Consider all options before pursuing an FHA loan with a cosigner. Analyze both creditworthiness and relationships to determine if cosigning is the right solution.