Answering questions is one of the best things about my job. I really enjoy being able to share the knowledge that I have accumulated in my over 25 years in lending. Of course, with the rapid changes in mortgage lending now, I have to be doubly concerned that the answer that was right yesterday is still right today. One of the multi user platforms that I belong to, My FHA Mortgage Blog, has started a mortgage question forum and I am doing what I can to answer some of the questions posed by people and try to get the right information out there. I will be using all three of my blogs to answer those questions, this one, FHA Loans Oregon and EugeneLoanguy. This question has to do with using a co-signer on an FHA loan.

Can A Retired Parent Collecting His Pension Be A Co-signer On A Home Mortgage?

November 18, 2009

My father would like to help us purchase our first home by co-signing on the loan for us. (yes, we both understand the implications of him being a co-signer on the mortgage). He is retired and living on his pension (not collecting SS just yet). Is this possible on a FHA mortgage?

To answer this question, first I need to use the right terms. When using another person that will not be living in the property to help purchase the property, they are called a non occupant co-borrower. A non occupant co-borrower can help you qualify for the loan based on debt ratio in which case their income (and debt structure) are added to yours to help you qualify for the loan if your income is not enough to qualify. Whether drawing a pension or a salary, combined debt ratio will be the determining factor.

A non occupant co-borrower will not make up for poor credit, so if you don’t credit qualify for the loan, having a “co-signer” will not help you. They can gift the down payment and/or closing costs without being on the loan with you so the only reason to use a non occupant co-borrower is to make up for too high of a debt ratio.

I hope that this answers your question and helps you and your father decide if this is something that will work for you. If you have any questions about FHA loans, contact me at 541-342-7576/541-221-3455 cell or e-mail me. I am here to help.

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