What You Need to Know About Non-Occupying Co-Borrowers for FHA and Conventional Loans
Buying a home can feel out of reach when you’re just starting your career or building your financial foundation. But with the help of a non-occupying co-borrower, you might be able to unlock the door to homeownership sooner than you think. Whether you're going with an FHA or Conventional loan, this approach can make all the difference—especially if you’ve got family or loved ones willing to support you.
What Is a Non-Occupying Co-Borrower?
A non-occupying co-borrower is someone who signs onto the loan with you but doesn’t plan to live in the home. Think of them like your financial teammate—they’re on the loan with you, and their income, credit, and assets can help you qualify when you’re not quite there on your own.
Most often, this is a parent, sibling, or close relative, but in some cases, even a friend or extended family member can fill this role.
FHA Loan Guidelines for Non-Occupying Co-Borrowers
FHA loans are known for being flexible and first-time buyer-friendly. They do allow non-occupying co-borrowers, but with some conditions:
If putting less than 25% down, your co-borrower must be a family member.
If the co-borrower isn’t family, you’ll need at least a 25% down payment.
The occupying borrower must contribute at least 3.5% of the purchase price from their own funds.
The co-borrower’s debts and income are factored into the loan decision.
Conventional Loan Guidelines for Non-Occupying Co-Borrowers
Conventional loans (Fannie Mae/Freddie Mac) offer even more flexibility in this area:
Co-borrowers don’t need to be related.
Great for buyers with good credit and some down payment savings.
Can go as low as 3% down in some cases, depending on other qualifying factors.
All borrowers’ income, assets, and credit are considered—but underwriting may use the lowest middle credit score between you and your co-borrower.
Real-Life Example #1: Helping a Future Nurse Break Free from Renting
Let me tell you about James (name changed for privacy), a nursing student just weeks away from graduating and getting his license. He had already accepted a job offer, but since he hadn’t started yet, he had no income to show on paper—and no savings for a down payment.
To make matters worse, his current rental situation was deteriorating fast. He needed out—now.
We got creative. James became the primary borrower, and we brought in his parents as non-occupying co-borrowers. Their income and assets helped him qualify, and we were able to get him into a home of his own right away. He didn’t have to wait for his first paycheck or get stuck in another rental cycle.
This approach allowed James to break free from a bad situation and launch his new life and career on a strong, stable foundation.
Then there’s Mary, a self-employed bookkeeper and accountant who recently launched her own business. Things were going well—she had consistent clients, strong credit, and even saved up for her own down payment.
She found the perfect home—exactly where she wanted to be, with her family nearby and the school district she had dreamed of for her kids.
But there was a catch: Mary hadn’t yet hit the two-year mark required for most lenders to count her self-employed income. Even though her business was thriving, she didn’t qualify on paper.
So, we brought in her aunt as a non-occupying co-borrower, and used her aunt’s income to help secure the loan. With this support, Maria was able to close on the home she needed, in the location she loved—without having to wait.
It was the right home, at the right time. And we made it happen with a little teamwork and a flexible loan strategy.
FHA or Conventional: Which One’s Right for You?
Here’s a quick comparison to help you decide:
VA Loan Guidelines for Non-Occupying Co-Borrowers
Here’s how it works:
Who Can Be a Co-Borrower?
Only another veteran or spouse can be a non-occupying co-borrower on a true VA loan.
If the co-borrower is not a veteran or the veteran’s spouse, the loan won’t be fully backed by the VA—and that changes things.
What If the Co-Borrower Isn’t a Veteran?
The loan becomes a “joint VA loan”, and not all lenders offer them.
The VA only guarantees the veteran’s portion of the loan.
The non-veteran co-borrower will need to bring their own income and credit to qualify.
A down payment may be required, depending on how much of the loan is guaranteed by the VA.
Pro Tip:
If a veteran needs help qualifying, a spouse is usually the best co-borrower option. If they want to use a parent, sibling, or friend, they may need to consider FHA or Conventional instead.
Final Thoughts
Non-occupying co-borrowers can be a game-changer—especially when life doesn’t line up with the paperwork just yet. Whether you’re graduating, growing your business, or just need a leg up to get out of a tough spot, this strategy can help you own your home sooner, not later.
If you're in a situation where you're close, but not quite there, let's talk. I’ll help you explore all your options and see if a non-occupying co-borrower could be the missing piece.
